Purchasing car insurance may sound simple. But once you get to realize the factors that you need to consider and examine before signing up for one, you’ll realize how cumbersome it can be. One of the most confusing things about motor insurance is the deductible. This grey area oftentimes causes a mix-up when it’s time to file and process a claim.
Compulsory deductible
Every policy has a provision for a compulsory deductible that is predetermined by the insurance provider. This amount is mandatorily deducted from the amount of claim the insurer is going to pay. In short, you don’t have a choice but shoulder this cost as your share in the claim.
A compulsory excess may vary from $250 to $1000 depending on the vehicle type. This is something that you should pay attention to before agreeing to the terms and conditions of the policy. Without settling this amount, the insurer will not be processing any claims.
Voluntary excess
As the name goes, voluntary deductible or excess is optional. This is the amount of money you are willing to pay out of your own pocket before your car insurance claim is processed and paid out by the insurer. Keep in mind that a voluntary deductible is on top of the compulsory one. Hence, if a policy has $1000 deductible and you voluntarily opted for $500, you will be responsible for the first $1500 cost of the repairs before the insurance provider pays the claim.
Opting for higher deductibles voluntarily
People often ask, “Why should I opt for higher deductibles when I’m already bounded by the compulsory one?” The answer is simple. Choosing to voluntarily increase your deductibles means lowering the amount of your car insurance premium.
Because compulsory deductibles are fixed and identified based on several factors (e.g. engine type and capacity) you do not get discounts on premiums for having $1000 deductible on your coverage. With voluntary excess, you share a portion in the cost of repairs, hence, you are rewarded by the insurer in the form of a premium discount.
