A two-wheeler is the best mode of transportation to cover a short journey. In fact, about 1/3rd of family homes in India have a two-wheeler vehicle. As per the law, each of these also need to have an insurance plan. While most two-wheeler owners understand the concept of two-wheeler insurance, only a few understand the associated deductible. In this article, we will break down the concept of deductibles in two-wheeler insurance, the types of deductibles and even help you make the decision of whether you should invest in a deductible.
What are Deductibles in Two Wheeler Insurance?
An insurance deductible is the sum which you, as the policyholder, commit to pay from your own pocket to cover the cost of repairing in case of an accident or unexpected damage. In other words, a deductible in two-wheeler insurance is the financial responsibility of the policyholder towards the claim amount. It is part of the conditions of your insurance policy. It is important to remember that the insurer only pays for the losses that are included in the policy.
Types of Deductible in Two Wheeler Insurance
There are two types of deductibles in your two-wheeler insurance:
1. Compulsory Deductibles:
Compulsory Deductible is the fixed sum which will be deducted even before the insurance plan pays. It is mandatory in India to have a Third Party insurance plan. Therefore, the associated compulsory deductible is automatically applicable. A Compulsory deductible is fixed depending on the kind of the vehicle. For two-wheelers, the compulsory deductible is applied as:
Compulsory Deductible in two-wheeler insurance depends on the engine capacity (in cc). For two-wheelers with engine capacity less than 350 cc, it is INR 50 while for those greater than 350 cc is INR 100.
Let’s understand it with an example - Sneha purchases a two-wheeler insurance for her scooty. The engine capacity of the vehicle is 110 cc. She got her vehicle insured with a Comprehensive cover with a mandatory deductible of INR 50. If she meets with an accident 6 months later, INR 50 will be deducted from the total settlement amount.
2. Voluntary Deductibles:
Like the name suggests, Voluntarily Deductible is an option. If you choose to pick a higher deductible amount, the bike insurance premium will be proportionately lower. Unlike the compulsory deductible, you can choose a voluntary deductible that suits your pocket. However, before choosing the voluntary deductible amount for your two-wheeler, it is important to consider the coverage, risk of an accident, IDV of the vehicle, and premium amount.
Difference Between Compulsory Deductibles and Voluntary Deductibles
| Compulsory Deductibles | Voluntary Deductibles |
|---|---|
| Amount is fixed by the insurance provider and borne by the policyholder. | Amount is decided and borne by the policyholder. |
| Has no effect on the Premium Amount | Higher Deductible reduces the Premium Amount |
How does Insurance Deductibles Work?
Two-wheeler insurance works similar to the contributions we make in our daily lives. This indicates that insurance providers also have a limit set on the financial compensation. In case of an accident, insurance deductibles are the contributions you make from your pocket.
If you have a Hero Passion Pro 110 cc worth INR 70,000 with an active insurance policy. For this bike, the insurance premium is INR 2500. Let’s consider the voluntary deductible in this case to be INR 5,000 while the compulsory deductible is INR 50. Based on these numbers, it is clearly that the cost of damage up to INR 5,000 will be borne by you. Once both - the compulsory and voluntary deductible is used, your insurance plan will cover the remaining cost of repairing.
Should you Choose Voluntary Deductible in Nike Insurance?
If you choose a voluntary deductible, you will need to pay along from the compulsory deductible. This often leads two-wheeler owners to believe they will be paying more. However, when you choose Voluntary deductible, you have the chance to purchase the insurance at a lower premium rate. This means if you are a safe driver with no history of claims, you can get a discount on your two-wheeler insurance renewal. The higher the voluntary deductible amount, the lower will be your insurance premium sum.
The table below compares the relation between Voluntary Deduction and Discount offered in the Premium Amount -
| Voluntary Deduction (in INR) | Discount in Premium Amount (in %) |
|---|---|
| INR 500 | 5% of Own Damage Premium, *Maximum discount of INR 50 |
| INR 750 | 10% of Own Damage Premium, *Maximum discount of INR 75 |
| INR 1000 | 15% of Own Damage Premium, *Maximum discount of INR 125 |
| INR 1500 | 20% of Own Damage Premium, *Maximum discount of INR 200 |
*PRO-TIP: Consider factors like age, accidental risk and driving skill before opting for a Voluntary deductible.
What if the Claim Amount is Lesser than the Deductible?
If the claim amount does not match the deductible as per the insurance policy, the case will not be considered. Another point that you need to take into account is your financial condition, in case of an expected accident.
Assume your two-wheeler vehicle is 10 years old. Due to wear and tear, it is no longer in good condition. The engine is old and needs regular maintenance at this point. The chance of your two-wheeler meeting with an accident still exists. However, as time passes, the market valuation or IDV of your two-wheeler vehicle decreases, and therefore the amount you can claim will also be considerably low. In such cases, it is not advisable to invest in voluntary deductibles.
Summary: Deductibles in two-wheeler insurance refer to your financial contribution in times of unexpected accidents or other mishaps. Compulsory Deductible is mandatory while Voluntary Deductible is decided by the policyholder. If you opt for a higher voluntary deductible, your premium amount is lowered. This is especially beneficial for young, safe riders with no history of claims.
