Most policyholders juggle between selecting compulsory and voluntary excesses in a motor insurance policy.
Let’s break it down step by step to understand the concept better.
Insurance companies may provide the option to share a portion of the risk associated with the selected policy.
The insured would pay for this part of the claim, often called the “deductible” or “excess.” Hence, when you file a claim, the policyholder can cover the deductible expense while the insurance provider handles the remaining costs.
For example, let’s say you buy a motor insurance policy with a set deductible amount of three thousand rupees. During a claim of six thousand rupees, the insurance provider would subtract three thousand rupees (excess or deductible) and pay the remaining three thousand rupees to settle the claim.
Deductibles can be of two kinds: compulsory and voluntary.
Compulsory deductible for vehicle insurance –
Every policy has a mandatory excess clause. A compulsory deductible or excess for your motor insurance policy that can be the sum insurance companies automatically deduct from every claim you submit.
Thus, your options get limited in this situation. It is a set sum that varies based on the kind of vehicle.
Voluntary excess –
Voluntary excess is optional, whereas compulsory excess is mandatory. You can select voluntary excess for your vehicle along with the compulsory excess. It is a deductible that you are willing to pay.
Why do people “voluntarily” choose deductibles?
A question that may undoubtedly cross people’s mind is what are the benefits of choosing a voluntary deductible when insurance providers already follow a mandated one? The reason being voluntary deductibles reduce the premium on your policy.
The deal you receive on the optional deductible increases based on the premium amount.
A high deductible means a higher personal cost –
Deductibles undoubtedly contribute significantly to lower premiums. Likewise, finding the suitable premium amount using a vehicle insurance calculator online can help in planning of the policy.
But first, you should consider your options, they are:
- You may have to pay for the expenses. Hence, it helps in choosing the deductible amount that can be affordable.
- Claims may come in quickly. For a large deductible, this might be a drawback. Since you may have to produce a considerable amount speedily and liquidity can take some time.
Co-payment and excess: two various possibilities
Co-payments, another frequently provided choice by insurers, work differently than deductible/excess.
A deductible is a fixed amount of the claim that the insured person must pay on top of any co-payments. A set amount that the policyholder has agreed to pay during the t. A wise option of checking out these plans online can help make the process of vehicle insurance online payment easy, swift and time efficient.
For instance, in the case of a co-pay, there would be a negotiated percentage, say 10%. 10% of a claim of Rs. 10,000 can be covered by the insured.
i.e., The insured would pay Rs. 1000, with the insurer picking up the balance.
Choosing a deductible should be based on your confidence on the road –
Choosing the right deductible may seem challenging. However, to decide on your voluntary deductible, scrub through your driving record and your budget for motor insurance policy. These two factors can be the deciding factor for choosing the affordable and doable deductible as per personal choice.
Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.