What Is Deductible In Car Insurance And How Do They Work?

Deductibles in car insurance simply mean a cost that you have to pay before the policy covers the remaining claim amount. The Insurance Regulatory and Development Authority of India (IRDAI) sets a certain deductible amount which is calculated for each car insurance based on the vehicle’s engine cubic capacity and it also depends upon per claim. For instance, if you file a claim for 10,000 INR and the deductible is 1,000 INR then you will have to pay 1,000 INR towards the repair yourself and the remaining would be covered by the insurer.

Why Are Deductibles Employed By Car Insurance Providers?

It is believed by car insurance providers that deductibles make the policyholder responsible for handling their car rightly. It ensures that it is a joint collaboration between the insurer and the car owner or driver to maintain the upkeep of the car. It also allows car insurance plans to be priced competitively by the insurers and makes them accessible to a wider range of customers.

Increasing the deductible is a way to reduce premiums for car insurance. But it is not a wise move as any amount spent on repairs would have to be paid by yourself if the deductible is high. Therefore, it is ideal to choose only as much deductible as you can afford to pay yourselves, considering how much you can pay without having an impact on your other expenses. And including factors like your household budget, your saving plan,your income and also your access to credit.

Types Of Deductibles In Car Insurance

When it comes to car insurance plans, there are two types of deductibles, namely;

  • Compulsory Deductible and
  • Voluntary Deductible

Compulsory deductible is mandatory to be paid while a Voluntary deductible is fixed by the policyholder with their insurer. IRDAI regulations have fixed the value of Compulsory deductible in car insurance. It is based on the cubic capacity of the car engine. Currently, it is set at 1,000 INR for a car with a cubic capacity up to 1500cc, and at 2,000 INR for a greater cubic capacity.The compulsory deductible does not have any impact on the car insurance premium as it is to be paid as part of the claim by the policyholder themselves. It is only applicable to comprehensive car insurance and not to third-party liability-only car insurance policies.

While voluntary deductible impacts car insurance premiums largely. A higher amount of voluntary deductible means a lower premium on the Car insurance policy. However, it also means paying all that money on repairs by own. So, it is advisable to decide on the amount of voluntary deductible, if any, very wisely.

Apart from considering finance and claims, you also need to check the value of your car. If you own an expensive vehicle then the premium for the car insurance will be high as well. It shall be better to opt for a small deductible so as to save on the premium amount. As you shall not make small claims to build up your NCB - No claim bonus, so it would be sensible to choose a deductible equal to that amount for which you would anyways not file any claim.

Difference Between Voluntary Deductibles And Compulsory Deductibles In Car Insurance


Voluntary deductibles

Compulsory deductibles


Voluntary deductibles is chosen by policyholder based on how much they can pay on their own for repairs in times of filing claims

Compulsory deductibles are mandatory and the IRDAI fixes the amount for the same


In case of Voluntary deductibles, Higher the amount, lower is the premium on the policy

In case of Compulsory deductibles, there is no impact on any factor on the policy


In case of claim, if you have opted for Voluntary deductibles as well, you have to pay both Voluntary deductibles and Compulsory deductibles

In case of claim, if you have not opted for Voluntary deductibles, you only have to pay the Compulsory deductibles


Voluntary deductibles are based on car model, year of manufacture, approximate market value of car and your capacity of finances

Compulsory deductibles are only based on engine cubic capacity of cars and are fixed by IRDAI


Role Of Deductibles In Different Types Of Car Insurance Policies

As we all know car insurance is primarily of two kinds, Third-party Car Insurance Policy and Comprehensive Car Insurance Policy. While the Third-party Car Insurance Policy type of car insurance policy covers you against third-party liabilities, the Comprehensive Car Insurance Policy protects you against all damages to your car. In case of Third-party car insurance policy type, compensation can be in the form of injury or death of the third party or in case of repair to the property. As this type of insurance does not cover losses incurred by the insured car, deductibles are not applicable in Third-party car insurance policy. While, Comprehensive insurance offers broader coverage, it covers the cost of repairing damages to the car as well. Thus, both voluntary and compulsory deductibles are applicable in Comprehensive Car Insurance Policy.

While Comprehensive car insurance offers a wide range of coverages to financially secure you against accidents, theft and more. Claiming for minor damages can increase the cost upon renewal of the car insurance policy, hence Deductibles are applied with the intention to reduce the number of claims under a car insurance policy. So, it is wise to opt for voluntary deductibles only if you can and sensible to pay for compulsory deductibles on your car insurance policy and claim.

FAQs – Frequently Asked Questions

Let's take a look at some frequent queries on Understanding Your Car Insurance Deductibles and How They Work;

Q1. Does one have to pay the deductible if the fault is not theirs?

No, one only has to pay for the deductible on the claim that is paid out by the insurer.If another party is found to be at fault, their insurance company would pay for the damages and one will not have to pay any deductible.

Q2. Is the car insurance deductible applied on an annual basis?

No, a Deductible on car insurance is typically calculated on a per-claim basis.

Q3. If the deductible amount is more than the repair cost of the damage to the car, what should be done?

Ideally, it is recommended that no claim is raised in such circumstances as it is counterproductive and also one will lose the No Claim Bonus - NCB discount.

Q4. Which vehicles need compulsory deductible?

All insured vehicles in India have the compulsory deductible component in a car insurance policy. As per IRDAI, all car owners have to bear the compulsory deductible during claims.

Q5. Why are car insurance deductibles applied?

Deductibles are applied by car insurance providers because the compulsory deductible component is mandatory as per the IRDAI. And the voluntary deductible component is applicable if you have opted for it. Also, deductibles in car insurance encourage not raising claims for minor damages and for driving safely while maintaining the upkeep of the vehicle by the insured as well.

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