Compulsory and Voluntary Excess in a Motor Insurance Policy

• Protect yourself with third party or comprehensive cover
• Use bumper to bumper policies to reduce your liability
• Enjoy facilities like zero depreciation and roadside assistance covers

Apart from motor insurance being mandatory as per the law set by the Government it comes of great help if damage is caused to one’s vehicle following an accident or due to a riot, terrorist activity, natural calamity, etc. A comprehensive motor insurance policy ensures the first party and the third party are covered following an accident. When an accident occurs, or damage is caused to the car due to the aforementioned reasons, the policyholder is required to make a claim to avail the coverage of the damages. The policyholder can make a claim for the coverage up to the insured declared value (IDV) of the vehicle. The IDV depends on the age of the car, the engine capacity, the model, condition of the vehicle, etc. Now, when availing an insurance policy, applicants are in a fix whether to choose the two deductible options - the compulsory deductible or the voluntary excess deductible. Since an insurance company will cover the cost of the expenses only up to the deductibile value of the vehicle, it is important to understand the difference between the compulsory deductible and the voluntary deductible - in order to make a choice when purchasing a motor insurance policy.

Car insurance compulsory deductible

When availing a car insurance policy, the applicant has no option when it comes to the compulsory deductible. The compulsory deductible as the name states is deducted for every claim and the policyholder irrespective of the coverage has to meet this cost. The compulsory deductible depends on the make and model of the car. Either the policyholder pays the compulsory deductible amount directly or the amount is deducted from the coverage. Once this is deducted, the claim is paid out to the motor insurance policyholder.

Car Insurance Voluntary Excess

As already mentioned, the car insurance compulsory deductible is mandatory when one purchases a motor insurance policy but the voluntary excess is optional for the applicant. Based on the type of vehicle the applicant owns, he/she can choose the voluntary deductible. By choosing the voluntary deductible, there is no escape from the compulsory deductible, but depending on the voluntary deductible amount chosen by the applicant, the premium reduces. Higher the voluntary deductible, lower the motor insurance policy premium.

Things to keep in mind when choosing the voluntary excess in motor insurance

While the voluntary excess will benefit the policy applicant in a certain way, one should keep in mind the below-listed points before opting for the voluntary excess:

• Though the voluntary excess will reduce the premium of the motor insurance policy, one should choose an amount that is affordable. Since you will have to cash in on the expenses along with the claim coverage from the insurance company, choosing a deductible which you can manage to pay any time should be the first option. One should not prioritise the premium discount when choosing the voluntary excess.
• Since accidents occur out of the blue and are sudden, making sure that the voluntary excess amount is beyond your reach financially should be something to consider.
• The voluntary excess is not the co-payment option. For the co-payment option, the policyholder has to cover the percentage of the claim from his/her own pocket. In both cases, a premium discount is on the cards, but the voluntary excess is another option in motor insurance and not the same.
• Settle for a premium that is well within your budget. Choosing one that takes a toll on your finances will result in you failing to make the renewal. Likewise, choosing a voluntary deductible requires some prudence - taking into consideration your finances.

As already highlighted above, one seriously needs to consider their financial status when deciding/choosing the motor insurance premium and the voluntary deductible when availing a motor insurance policy. Choosing one that is way within your budget is the safest way to approach this. As already mentioned, the compulsory deductible is applicable for every claim made by the policyholder. Don’t be surprised or alarmed if you see this in your claim invoice.