One important thing to remember about insurance is that it is not a profit-making device for policyholders. Vehicle insurance is not an investment opportunity that will result in financial gains. Insurance packages for cars and motorcycles provide a safety net. They assist you financially in the event of an accident or car damage. However, the policy’s terms and circumstances regulate this ‘assistance.’ Excess insurance or Compulsory and Voluntary Excess is an important part of a policy’s terms and conditions that you should understand and be aware of when purchasing or renewing car insurance online or filing a claim.


What is Excess Insurance?

Deductibles are often referred to as Excess Insurance. Compulsory and voluntary Deductibles are the two forms of Deductibles. Excess Insurance is not a type of policy or an add-on. It is a technical term that is used in the insurance industry. When it comes to settling claims, the insurer considers Excess Insurance.


What is Car Insurance Excess Insurance?

When it comes to auto insurance, you can select between the Mandatory Excess and the Component. As mentioned earlier, Excess Insurance is nothing but Deductibles. When you pay a deductible, you must pay a specific amount when you settle a claim. It is the sum for which the insurance company will not compensate you. You can consider it a contribution. A Deductible like this is used to deter policyholders from filing frivolous claims.

Compulsory Deductibles (CD) and Voluntary Deductibles (VD) are the two forms of Deductibles (VD). In CD, you must pay a Deductible of the amount calculated. You can select the payment amount (over and above the CD) in VD.


Types of Excess Insurance:

This section is all about understanding CD and VD in detail.

1) Compulsory Deductible/Compulsory Excess:

The CD for a car is based on its engine capacity (cc). As a result, if your car’s engine has a larger cubic capacity, you’ll have to pay a greater CD.

A car with a 2000cc engine would have a CD of INR 2000. It would cost INR 1000 for a car with a 1400cc engine.

2) Voluntary Deductible/Voluntary Excess:

This section allows you to increase your excess amount voluntarily. The VD amount is higher than the CD amount. As a result, while filing a claim, you’ll have to pay the CD cost plus the VD amount. However, because you are willing to pay a predetermined sum at the time of a claim, the insurer may be able to offer you a discount on your premium.


Things to Know about Compulsory Deductibles in Car Insurance:

The following are some of the most crucial features of a CD in vehicle insurance.

  • Mandatory Excess is another name for a CD.
  • The policyholder cannot change the amount specified as a CD.
  • It prevents minor claims from being filed.
  • It is estimated based on the engine capacity of the vehicle.


Things to Know about Voluntary Deductibles in Car Insurance:

The following are some of the most crucial features of a CD in vehicle insurance.

  • Voluntary excess is another term for a VD.
  • The policyholder has the option to change the CD amount.
  • It may be useful in lowering the amount of premium that must be paid.
  • Lower claim pay-outs may result from a higher VD.


Difference between compulsory deductible and voluntary deductible

Basis Compulsory deductible Voluntary deductible
Meaning In the event of a claim, the policyholder is required to pay a predetermined amount. In the event of a claim, the policyholder must pay a predetermined amount voluntarily.
Another name Compulsory excess Voluntary excess
Modification This component cannot be changed by the policyholder. This component can be changed by the policyholder as long as it is greater than the CD amount.
Motive To discourage minor claims. To lower the amount of premium that must be paid.
Claim pay out Comparatively lower Comparatively higher


How Does Voluntary Excess Work?

The following is how the Voluntary Excess or Voluntary Deductible in vehicle insurance works.

  • Step 1: When obtaining or renewing a motor insurance policy, advise the insurer that you have decided to go with the VD.
  • Step 2: The insurer will validate your request and talk to you about the VD amount.
  • Step 3: After the VD amount has been determined, the insurer will compute the payable premium based on the indicated VD.
  • Step 4: Pay the finalised premium and purchase the insurance coverage.
  • Step 5: Pay the pre-determined and discussed VD and settle the claim at the time of the claim.


Benefits of Choosing a Voluntary Deductible or Voluntary Excess:

Here are some of the advantages of opting for VD.

1) Low Premium is the first benefit of voluntary excess :

The most significant benefit of opting for a VD is that you will pay a cheaper premium. This is because if you choose VD, the insurer does not have to cover all of your claims. This is reflected in the premium payable, and it benefits you, the policyholder.

2) Flexibility:

You have the option of selecting the VD. It costs between INR 2500 and INR 15,000 to complete. The higher the VD, the greater the Own Damage discount.


Disadvantages of Opting for a Voluntary Deductible/Voluntary Excess:

The disadvantages of opting for VD are listed below.

1) Low pay-out:

Since you’re promising the insurance company that you’ll contribute a specific amount over the CD at the time of the claim, you’ll get a smaller pay-out when it comes time to settle the claim. This may go against the primary reason for auto insurance, which is to offer financial help in the event of an unforeseen event for which you must file a claim.

2) Sudden Payment is a disadvantage of voluntary excess :

This argument is related to the issue of not fully insuring a car. When it comes to VD, the insurance does not provide appropriate financial support, and you must pay (as determined) at the time of repairs. If the repair costs are too great for you to bear, this sudden payment may be difficult for you to deal financially.


Who Should Opt for Voluntary Deductible?

Choosing a VD is a personal decision that everyone seeking Comprehensive Car Insurance can make. Choosing a VD can be advantageous for the following categories of persons.

1)Car Owners/Drivers with a Lot of Experience:

Experienced drivers have a lot of confidence. They are the ones in charge of their car. As a result, the likelihood of a claim decreases in comparison. As a result, if you are a seasoned driver, you can choose a VD and benefit from lower premiums without worrying about a claim, which, based on your expertise, is less likely to occur than if you were a beginner.

2) Financially Secured Individuals:

If you are financially secure (to some extent) and do not mind contributing to the claim amount for car repairs, the VD option may be advantageous to you.


Who Should Not Opt for Voluntary Deductible?

If you fall into one of the following two groups, you should avoid getting a VD.

  • New Car Owner/Driver: New drivers are more likely to be involved in an accident. In addition, restoring damages to a new car might be costly. As a result, in such circumstances, the possibilities of filing a claim are higher. As a result, having a greater insurance policy that covers for the majority of the claim settlement is advantageous to you. You may wind up paying more rates, but since the odds are stacked against you, it is wiser to accept the mandatory deductible.
  • Low Savings: If you don’t have any savings set aside for car repairs, you’re better off letting the insurer handle the claim settlement fully on their own. Why would you want to put yourself in a position where you’ll have to pay a portion of a claim out of your own pocket when you don’t have enough money set up for such an event? People with limited savings are more inclined to use their savings for an emergency (such as health concerns) rather than repairing their car.


Add-ons for Car Insurance Policies: Is VD One of Them?

A car insurance add-on is an extra layer of protection. It is obtained by paying an additional premium. With a Comprehensive Plan, you can choose add-ons for your auto insurance. Add-ons are optional. Not all optional features, however, are considered add-ons. A Voluntary Deductible, for example, is not an add-on; it is a voluntary benefit choice.


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