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March 08, 2016 12:00

Auto insurance is among the most beneficial schemes launched in the automotive industry of the nation. With its merits far-reaching, easy car finance allows each individual to purchase a vehicle of their choice. However, this additional scheme needs to be compensated by shedding one's own pocket so as to gain maximum advantage. Each vehicle insurance is assigned with a specific premium rate, which is decided on the basis of the Insured Declared Value (IDV) of that specific model. The premium needs to be paid annually so as to make sure that the vehicle owners get the benefits of the scheme for as long as they wish to. Furthermore, one also has to pay certain amount, called deductible, from his/her pocket whenever a claim is made through vehicle insurance. This deductible can be hefty and mainly consists of two parts – the voluntary and compulsory excesses.

The voluntary deductibles in car insurance is the amount, which is fixed by the insured in order to be paid during every claim. This type of deductible is advantageous for people who want to get a certain discount on their auto insurance premium. Voluntary deductibles in car insurance is somewhat an undertaking with the consent of the insured person that he/she shall pay a specific sum for each claim. For instance, a person has met with a car accident and his/her damage claim sums up to be somewhere around Rs. 10000. In such a case, if the insured person decides to pay Rs. 5000 of the claim on his/her behalf, then that amount will be termed as the voluntary deductible. Also, the overall claim will now be only worth Rs. 5000 and not Rs. 10000. The voluntary deductibles in car insurance allows people to avail a sufficient percentage of discount on their premium.

Coming to the compulsory deductibles in car insurance, this deduction is the amount prefixed by the insurer on the premium. In simple terms, the compulsory deduction is a specific amount, which needs to be paid necessarily in order to get the vehicle damage claim. In case, if a person decides to fix his voluntary deductible as Rs. 3000, then he would be getting a discount of around 20-25 percent on the auto insurance premium. But, in addition he would also have to pay the compulsory deductible in car insurance that has been decided by the scheme provider. This type of clause is added by almost all the insurance providers as well as the dealerships across India. The compulsory deductibles in car insurance is prefixed at a high rate to ensure that minimum claims are being made.

High rate of compulsory deductible indirectly makes sure that an insured driver will be driving more cautiously as he/she will be aware of the additional charges to be paid in case of any claim. A company can also put an increased compulsory deductible when it finds a certain person at a high-risk of insuring. This deduction is the typical example of the measures taken by corporate firms to maximise their profit even while giving numerous benefits to the insurance holders. It is always advised that people who want to buy cars through insurance should check all the conditions mentioned thoroughly so as to save the maximum from their own pocket.

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