AUTO INSURANCE: Reduce the premium with deductibles


When buying auto insurance, many opt for a higher voluntary deductible amount to lower the premium. Although these deductibles encourage the policyholder to drive safely and not claim minor damages, he will have to pay higher costs in the event of a claim. Deductibles in car insurance are cost sharing agreements between the insurer and the insured where part of the claim is paid by the policyholder before obtaining the insurance claim.

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There are two types of deductibles – compulsory and voluntary – and the policyholder should understand the terms and conditions of the deductibles mentioned in the policy document. While the mandatory deductible is set by the insurance regulator, the voluntary deductible is decided by the policyholder. Rakesh Goyal, director of Probus Insurance, explains that the deductible is calculated based on the value of the premium and the percentage of cover. “The higher the value of your deductible, the lower your premium will be,” he says.

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The policyholder should not always look for cheap cover as it will come with a higher voluntary deductible. John Mayne, executive director of CoverStack, an insurtech startup, says the amount of the voluntary deductible is decided by the individual insured when purchasing the policy. “If an insured person’s ability to bear costs is higher at the time of the claim, he has the advantage of paying fewer premiums over the years. However, it is better to choose an affordable amount as a voluntary deductible because in the event of significant damage, one may incur higher expenses,” he says.

Compulsory deductible

All insured vehicles will have a mandatory deductible component in the policy as per insurance regulator standards and the amount will depend on the engine capacity. For passenger cars up to 1499 cc, the compulsory deduction is Rs 1,000 and for those above Rs 2,000. The compulsory deductible has no effect on the insurance premium as it is paid by the insured as expenses in the event of a loss.

What should be the amount of the voluntary deductible

An insured should decide the amount of the voluntary deductible based on the premium they have to pay for the policy and their level of comfort with paying out-of-pocket expenses in the event of a claim. The voluntary deductible must be decided after taking into account the use of the car and the risks to which the insured perceives he could be exposed. For example, if the use of the car is less and it is exposed to less risk, you can opt for a higher deductible. Your driving skills and the area where you usually drive the car are other things to consider. “Given all of this, you can decide whether or not to go for a higher deductible,” says Goyal.

You also have to look at the repair costs in the event of damage, especially if it is a new car. “If you opt for a higher deductible in addition to the mandatory deductible, you have several options to choose from and benefit from discounts. Higher deductibles generally offer higher discounts on the premium, but choose wisely taking into account the likelihood of damage and the affordability of it,” says Mayne. So if you go for a higher deductible, make sure you or whoever is driving your car is careful and that advanced safety features are in place. installed in the car.Also opt for comprehensive coverage as well as additional coverages such as zero depreciation, engine coverage and vehicle replacement.

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