Deductibles In Motor Insurance

Deductible, also called excess is the amount that is paid by the policyholder before the insurance comes into force. This amount is deducted from the total claim by the insurance company while processing it for reimbursement. In case of cashless claims, the deductible part is paid by the policyholder and rest is handled by the insurance company.

While a deductible reduces the chances of claim for the insurance company, it also reduces the premium for the vehicle owner. Higher the deductible, lesser the premium as a part of the damage will be paid by the vehicle owner.

Excesses can be compulsory and voluntary.

Compulsory Deductible
It is the amount that fixed and has to be paid by the vehicle owner before the any claim can be made. In India, since vehicle insurance is compulsory, the compulsory deductible is also fixed based on the type of vehicle.

Compulsory deductible for two wheelers:
For 2 wheelers less than 350cc: Rs. 50/-
For 2 wheelers above 350cc: Rs. 100/-

Compulsory deductible for two wheelers:
For Cars less than 1500cc: Rs. 500/-
For cars above 1500cc: Rs. 1000

For any vehicle claim raised, this amount is deducted from the claim before reimbursement or the cashless claim.

Voluntary Deductible
Voluntary deductible is the amount that the vehicle owner decides to pay himself in case of a claim.One needs to determine the voluntary deductible part at the time of taking the policy. It needs to be paid only if the claim arises. By taking higher deductibles, one can reduce the motor insurance premium substantially. Taking high deductibles can also go adverse if it is set too high. One has to bear the deductible amount when the claim arises and if it is too high one may actually loose on all the premium savings.

One needs to be cautious if one is opting for the voluntary deductible. It needs to be kept at an amount one can easily afford to pay for damages at a given point.