Deductibles in Car Insurance

A car insurance deductible is the amount you pay out of pocket before your insurer covers the cost of a claim. In simple terms, it’s the portion of the claim you are responsible for before your insurance policy kicks in. Generally, the higher your deductible, the lower your premium, but it also means you’ll pay more if you need to file a claim.

For example, if your Tata AIG comprehensive car insurance policy has a ₹5,000 deductible and your car sustains ₹15,000 in damage, you’ll pay the first ₹5,000. Tata AIG will cover the remaining ₹10,000, minus any applicable exclusions, such as depreciation on parts. According to the policy, depreciation applies to certain components like rubber, nylon, plastic parts, and airbags, with different rates depending on the part's age.

While a higher deductible reduces your premium, it also means you’ll be paying more upfront if an accident happens. Be sure to choose a deductible that balances your budget and coverage needs effectively.

When it comes to deductibles in car insurance, there are two main types to consider:

• Compulsory Deductible in Car Insurance: Now commonly referred to as a “Standard Deductible,” this is a fixed amount defined by the IRDAI for all own-damage claims. For private cars with engine capacity up to 1500cc, the deductible is ₹1,000; for cars above 1500cc, it’s ₹2,000. This insurance car deductible is mandatory and applies every time you make a claim under a comprehensive or standalone own-damage policy, even if you’ve also opted for a voluntary deductible. Whether you’re covered under a third party car insurance plan with an own-damage add-on or a full zero depreciation car insurance policy, this compulsory deductible stays constant.

• Voluntary Deductible in Car Insurance: This is an optional amount you agree to pay in addition to the compulsory deductible for each claim. Opting for a higher voluntary deductible can help you lower your car insurance premium, but it also means a higher out-of-pocket cost when you raise a claim. Let’s say you choose a ₹5,000 voluntary deductible along with the standard ₹1,000 compulsory one. In a ₹10,000 repair situation, you would pay ₹6,000 and the insurer would cover the remaining ₹4,000. It’s important to understand this trade-off when exploring deductibles in car insurance, especially if you’re comparing commercial car insurance options or customising your own-damage cover.

Also Read: How to Lower Your Car Insurance Premium

Deductibles are an integral part of car insurance policies. They determine the amount you pay out of pocket and help you make a choice based on your risk tolerance. This amount is typically fixed and comes in two types: voluntary and compulsory.

For example, let us assume that you have an own-damage car insurance policy with a deductible of ₹3,000. If your car sustains damage resulting in a repair cost of ₹15,000, you will pay ₹3,000 upfront, and your insurer will cover the remaining ₹12,000.

This voluntary deductible amount is set when you buy a car insurance plan. The insurer asks you to choose the amount which is implemented when you claim the insurance during claims. Voluntary deductibles are often used to lower premiums, so the higher the amount you agree to pay as deductible, the lower the premium you pay. However, it also increases your financial responsibility during claims.

In contrast, compulsory deductibles are fixed amounts regulated by authorities like IRDAI to ensure standardisation across policies. Thus, it plays a vital role in balancing premium affordability with risk sharing. They encourage responsible driving by reducing small or frequent claims while helping insurers manage claim costs effectively.

As stated above, the deductible is the portion of the claim amount that the policyholder must pay at the time of settling a claim.

Now, let us look at the differentiating factors that distinguish Compulsory Deductibles in car insurance from Voluntary Deductibles:

Understanding deductibles in car insurance helps you know what you'll pay from your own pocket before the insurer contributes. The role of deductibles varies depending on the type of policy you hold.

In a comprehensive car insurance policy, both a compulsory and a voluntary insurance car deductible may apply. The compulsory deductible is set by the IRDAI and is fixed based on your car’s engine size. On top of this, you can choose a voluntary deductible, which helps reduce your premium. But remember, the higher the voluntary deductible you choose, the more you’ll need to pay during a claim.

Let’s say your car suffers damage worth ₹20,000. If your compulsory deductible is ₹1,000 and you’ve opted for a voluntary deductible of ₹5,000, you’ll need to pay ₹6,000 in total. Your insurer will then cover the remaining ₹14,000.

In contrast, third-party car insurance covers damage caused to others, not your own car. So, deductible and car insurance don’t go hand in hand here, deductibles don’t apply in third-party-only policies.

After selecting a comprehensive car insurance policy with useful add-ons like roadside assistance, zero depreciation cover, or personal belongings protection, understanding deductibles in car insurance helps you balance costs and claims effectively. The right insurance car deductible choice can lower your premium while keeping you financially prepared for repairs.

Here’s when a voluntary deductible may make sense:

• You have a solid emergency fund: A higher deductible means more out-of-pocket expense at claim time, manageable if you’ve budgeted for it.

• You have a good driving history: If you rarely file claims, choosing a voluntary deductible can significantly reduce your annual premium.

• You own a high-value car: Premiums tend to be higher for expensive vehicles. Opting for a voluntary deductible helps offset these costs.

Tata AIG offers structured premium discounts based on voluntary deductible amounts—up to 35% off the own-damage premium, depending on the deductible you choose. This is over and above the standard deductible of ₹1,000 for cars up to 1500cc and ₹2,000 for higher capacities, as mandated by IRDAI.

Choosing the right deductible is all about balancing savings and financial readiness. Assess your comfort level and driving habits before deciding.

Car insurance usually falls into two categories: Third-party and Comprehensive. Third-party insurance covers you for damages caused to others, while comprehensive insurance also protects your own car.

Here is how deductibles work in each:

• Third-party Car Insurance: This type covers injuries, deaths, or property damage to others. Since it does not cover damage to your own car, deductibles are not part of this policy.

• Standalone Own Damage (OD) Insurance:This policy covers repairs and damages to your own vehicle due to accidents, theft, natural calamities, fire, etc., but excludes third-party liabilities. Both compulsory (standard) and voluntary deductibles apply on own damage claims under standalone OD insurance, just like with comprehensive policies.

• Comprehensive Car Insurance: This provides broader coverage, including repairs for your own car. That is why both voluntary and compulsory deductibles apply to this type of insurance.

Read more: Voluntary Deductible in Car Insurance

Tata AIG offers comprehensive car insurance plans designed to protect both your vehicle and third-party liabilities. From accidents and theft to natural calamities like floods or earthquakes, these policies cover a wide range of risks. You also get personal accident cover for the owner-driver, giving you added peace of mind on the road.

Understanding deductibles in car insurance is important if you want to manage long-term insurance costs. When you choose a deductible, whether it's the standard insurance car deductible set by IRDAI or a voluntary one, you agree to share a portion of the repair costs. This discourages frequent small claims, helping you preserve your No Claim Bonus (NCB) and keep renewal premiums affordable.

With Tata AIG, you can customise your policy with useful add-ons like zero depreciation, engine secure, return-to-invoice cover, and roadside assistance. The insurer also offers NCB protection, which allows you to make limited claims without losing your earned discount.

By offering a solid mix of coverage, smart add-ons, and support like 24/7 assistance and cashless garage access, Tata AIG makes it easier to balance protection and cost, especially when you understand how deductible and car insurance decisions go hand in hand.