Compulsory and Voluntary Excess in Motor Insurance

When purchasing motor insurance, you may come across the terms "compulsory excess" and "voluntary excess". These are two types of excess that can affect your insurance premium and claims. In this article, we will explain what compulsory and voluntary excess are, how they differ, and how they can impact your motor insurance policy.

What is Excess in Motor Insurance?

Excess is the amount of money that you are required to pay towards a claim before your insurance company will cover the remaining costs. It is a way for insurance companies to share the risk with their customers and prevent small claims from being made.

For example, if you have a motor insurance policy with a compulsory excess of Rs 500/- and you make a claim for 2000/-, you will have to pay Rs 500/- towards the claim and your insurance company will cover the remaining Rs 1500/-.

What is Compulsory Excess in Motor Insurance?

Compulsory excess is the amount of excess that is set by your insurance company and is mandatory for all policyholders. It is usually a fixed amount, but it can also be a percentage of the claim amount.

The purpose of compulsory excess is to discourage policyholders from making small claims and to reduce the administrative costs for the insurance company. It also helps to keep insurance premiums lower for everyone.

Compulsory Excess in Commercial Vehicles

In the case of commercial vehicles, the compulsory excess is usually higher than that of private vehicles. This is because commercial vehicles are at a higher risk of accidents due to their frequent use and heavy loads.

The compulsory excess for commercial vehicles can range from Rs/- 500 to Rs 2000/-, depending on the type of vehicle and its usage.

What is Voluntary Excess in Motor Insurance?

Voluntary excess is the amount of excess that you choose to pay on top of the compulsory excess. It is an optional amount that you can select when purchasing your motor insurance policy.

By choosing a higher voluntary excess, you are essentially taking on more risk and reducing the risk for your insurance company. In return, your insurance company may offer you a discount on your premium.

Voluntary Excess Discount

The discount offered by insurance companies for choosing a higher voluntary excess can vary. Some companies may offer a flat discount, while others may offer a percentage discount based on the chosen excess amount.

For example, if your insurance company offers a 10% discount for a voluntary excess of Rs 1000/-, and your premium is Rs 1000/-, you will receive a discount of Rs 100/-, making your premium Rs 900/-.

Why should you voluntarily opt for deductibles?

This is a question which would be rising in your mind. Why should we opt for a voluntary excess when it is already compulsory excess obligatory for motor insurance companies? The idea is simple.

The voluntary deductibles decrease the amount of policy premium.

The higher the voluntary excess you opt for, the higher is the discount you get on the motor insurance premium.

Compulsory excess does not provide any premium discounts.

Voluntary excess is over and above the compulsory deductibles on your motor insurance policy. Depending on your paying capacity and budget, you can choose the voluntary access from zero to a suitable amount.

You should choose to opt for voluntary excess only when you are confident about your financial conditions. You need to be prepared to raise money on your part of the excess of motor insurance policy.

In case you don’t file a claim, you enjoy lower premium, but if you have to file a claim, you have to pay on your part of the claim as agreed.

However, the amount of excess varies depending on various factors. The excess varies according to the policy that you select. You may also have a provision to adjust the excess amount.

Additionally, if you are a young and inexperienced driver, you may require to pay a higher excess. This is because as a young and inexperienced driver, you fall into a higher risk category.

How Do Compulsory and Voluntary Excess Differ?

The main difference between compulsory and voluntary excess is that compulsory excess is mandatory and set by the insurance company, while voluntary excess is optional and chosen by the policyholder.

Another difference is that compulsory excess is a fixed amount, while voluntary excess can be chosen by the policyholder within a certain range.

Imposed Excess in Motor Insurance

In some cases, your insurance company may impose an additional excess on top of the compulsory and voluntary excess. This is known as an "imposed excess" and is usually applied to high-risk drivers or drivers with a history of making frequent claims.

For example, if your insurance company imposes an excess of Rs 1000/- on top of the compulsory and voluntary excess, and your claim is for Rs 2000/-, you will have to pay a total of 2500 towards the claim.

What is Additional Excess Car Insurance?

Additional excess car insurance is an optional add-on that you can purchase to reduce your excess amount. It is also known as "excess protection" or "excess waiver" insurance.

With additional excess car insurance, you can claim back the excess amount that you have paid towards a claim, up to a certain limit. This can be useful if you have a high excess amount and want to reduce your out-of-pocket expenses in the event of a claim.

What is Policy Excess in Motor Insurance?

Policy excess is another term that is commonly used in motor insurance. It refers to the total amount of excess that you are required to pay towards a claim, including the compulsory and voluntary excess.

For example, if your policy has a compulsory excess of Rs 500/- and a voluntary excess of 1000, your policy excess will be Rs 1500/-.

Voluntary Excess Meaning in Hindi

For our Hindi-speaking readers, "voluntary excess" translates to "स्वेच्छिक अधिकतम" in Hindi.

This Policy Has an Imposed Excess of Rs 1000/- for Each Claim

If you come across this statement in your motor insurance policy, it means that your insurance company has imposed an additional excess of Rs 1000/- on top of the compulsory and voluntary excess for each claim.

Voluntary Excess in Insurance

Voluntary excess is not limited to motor insurance. It is also a common feature in other types of insurance, such as home insurance and health insurance.

In home insurance, voluntary excess can be chosen for each section of the policy, such as buildings and contents. In health insurance, voluntary excess can be chosen for each claim or for the entire policy.

Takeaways

Compulsory and voluntary excess are two types of excess that can affect your motor insurance policy. Compulsory excess is mandatory and set by the insurance company, while voluntary excess is optional and chosen by the policyholder. By choosing a higher voluntary excess, you can receive a discount on your premium, but you will have to pay a higher amount towards a claim. Additional excess car insurance is an optional add-on that can help reduce your excess amount. It is important to understand the terms and conditions of your motor insurance policy to know how excess can impact your claims.

Also Read: Car Insurance Motor Benefits: You Must Know!