Should You Opt for A Higher Deductible on Your Motor Insurance Policy?

When it comes to car insurance, there are a wide array of things related to coverage and claims that are often overlooked. This can be avoided by understanding your insurance policy thoroughly before you make the purchase. Doing so will save you from any troubles while making a claim. In motor insurance plans, one such overlooked concept is ‘deductible’. Understanding this term will not only help you while buying a policy but also affect the claim settlement process.

What are deductibles?

The deductible in motor insurance plans is the amount you have to pay out of your pocket at the time of making a claim, before the insurer pays the rest. The exact deductible amount is agreed upon at the time of policy purchase.

You should exercise caution when selecting an amount of voluntary deductibles. This is because while a higher deductible reduces your premium, it increases your out-of-pocket expenses during a loss event.

How do they affect a policyholder?

Two types of deductibles may be applied to your motor insurance claims. The first type is a compulsory deductible. The amount of a compulsory deductible is fixed by IRDAI based on your vehicle’s cubic capacity. You have to pay this amount while making any claim.

The second type is a voluntary deductible. This means that you can opt to pay or not pay an additional deductible amount. Paying an additional amount as voluntary deductible offers you a discount on your premium amount. When you make a claim, an amount combined of both your compulsory and voluntary deductibles will be excluded from the claim amount – and you will have to bear this amount.

For example, if you have a compulsory deductible of ₹2,000 and opt for a voluntary deductible of another ₹2,000 – you will have to pay ₹4,000 out of every claim you make on your insurance policy, and the insurer will pay for the rest.

Should you increase your deductible?

The question of should you opt for a higher deductible still remains. This depends on your situation and the correct answer changes from person to person. If you generally have enough money on hand to pay for damages to your vehicle by yourself, then you should consider opting for a higher deductible. This way, you will have protected your car and saved money. However, make sure that you opt for a deductible that you can pay without having to stretch your finances.  

To many, a deductible feels like a thorn in a rose. However, it may also be an opportunity for you. Hence, before you go looking to buy motor insurance plans, thoroughly look into car insurance deductibles. If you have already purchased a policy, it is still not too late for you. You can still opt for a deductible as per our requirement at the time of renewal.