Getting a Car Insurance? Learn about Excesses First for Better Deals

Getting a Car Insurance? Learn about Excesses First for Better Deals

Apart from the fact that motor insurance is required by law, it is extremely beneficial in the event that one's vehicle is damaged as a result of an accident, riot, terrorist activity, natural disaster, etc. Following an accident, a comprehensive automobile insurance coverage ensures that both the first and third parties are covered.

When an accident occurs or the car is damaged due to the aforementioned factors, the policyholder must file a claim in order to receive coverage for the damages. The policyholder can file a claim for coverage up to the vehicle's insured stated value (IDV). The IDV is determined by the vehicle's age, engine capacity, type, and condition, among other factors.

Applicants must now select between the two deductible alternatives when purchasing an insurance policy:

  • Compulsory Excess
  • Voluntary Excess

Because an insurance company will only cover expenses up to the Excess value of the vehicle, it is critical to understand the difference between the Compulsory and Voluntary Excess in order to make an informed decision when acquiring a car insurance policy.

Therefore in this blog you will get to learn about what Compulsory and Voluntary Excess refers to and what are the differences between them. We will also help you in finalizing which one among them is beneficial for you. So grab a pen and let’s learn.

Before understanding about the Excesses, you must first understand about what is Car Insurance Excess?

 

The excess on your car insurance policy is the amount you must pay when you file a claim. Customers of car insurance might share a portion of the risk associated with the policy. The "excess" or "deductible" is a pre-determined amount of the claim that you, as a policyholder, will be responsible for. So, if you have a claim, all you have to do is pay the excess amount, and the rest will be handled by the car insurance company.

Compulsory Excess

When it comes to the Compulsory Excess, the applicant has no choice when purchasing a car insurance coverage. As the name implies, is taken from every claim, and the policyholder is responsible for this expense regardless of coverage. The Compulsory Deductible is determined by the car's make and model. It is either paid directly by the policyholder or subtracted from the coverage. The claim is paid out to the car insurance policyholder once this is deducted.

Voluntary Excess

As previously stated, while purchasing a motor insurance policy, the Compulsory Excess is required, but the Voluntary Excess is optional for the applicant. The applicant can select it based on the type of car he or she owns. There is no way to avoid the Compulsory Excess by choosing the Voluntary Excess, but the premium will be reduced accordingly on the Voluntary Excess’s amount selected by the applicant. The lower the Voluntary Excess, the lower the premium on a car insurance coverage.

Factors to keep in mind while opting for Voluntary Excess in UAE.

While the Voluntary Excess will assist the insurance applicant in some ways, the following points should be considered before choosing it:

Voluntary Excess in UAE

AFFORDABILITY

Though a voluntary excess will lower the price for a motor insurance coverage, the amount should be reasonable. Because you'll have to pay for the charges as well as the insurance company's claim coverage, the first option should be a deductible that you can afford to pay at any time. When picking a voluntary excess, the premium discount should not be prioritized.

REACH

Because accidents happen out of nowhere and at any time, making sure that the voluntary excess amount is out of your financial grasp is a good idea.

SMART PREMIUMS

Choose a premium that is well within your price range. If you choose one that would put a strain on your money, you will be unable to renew your contract. Choosing a voluntary deductible, likewise, necessitates some foresight, taking into account your financial situation.

SHOULD NOT CONFUSE WITH A CO-PAYMENT OPTION

The voluntary excess is not the same as a co-payment. In the co-payment option, the policyholder is responsible for paying a portion of the claim out of pocket. A premium discount is available in both circumstances, but the voluntary excess is a different choice with car insurance.

Why should we choose a Voluntary Excess when a Compulsory excess is already required by Car Insurance Companies?

 The answer to your question is fairly simple. The amount of the policy premium is reduced by the Voluntary Excess. The bigger the voluntary excess you choose, the greater the discount on your Car insurance rates you will receive. The voluntary excess on your car insurance policy is in addition to the Compulsory Excess. You can choose from zero to a reasonable amount of voluntary access depending on your financial capacity and budget.

You should only choose it if you are confident in your financial situation. You must be willing to raise funds to cover your portion of the excess on your auto insurance policy. If you don't file a claim, your premium is reduced; nevertheless, if you do have to file a claim, you must pay your portion of the claim as agreed.

The quantity of excess fluctuates, however, depending on a variety of conditions. The excess varies depending on the coverage you choose. You can also have a clause in your contract that allows you to adjust the extra amount. You may also be required to pay a larger excess if you are a young and inexperienced driver. This is because you are a high-risk driver because you are young and inexperienced.

What effect does the Excess amount have on the premium you pay?

The excess amount is the amount you contribute to a claim. As a result, if you are ready to contribute at the time of a claim, you will benefit from a lower rate for the duration of your automobile insurance policy. You'll pay a larger premium if your excess is lower, and vice versa.

Is it a good idea to raise your Voluntary Excess?

Voluntary Excess is a gamble. You decide how unlikely you are to file a claim. The larger the bet, the higher the sum to pay for excess. You might take this risk if you consider yourself to be a cautious driver who is confident in your ability to avoid an accident. When you have a minor accident, your total excess may be equal to or greater than the cost of fixing the vehicle. In this instance, you must consider whether or not it is worthwhile to file a claim with your auto insurance. Even if you don't file a claim, it's a good idea to notify your insurance about the accident.

Conclusion

As previously said, when deciding/choosing the car insurance premium and the voluntary excess when purchasing a car insurance policy, one must seriously evaluate their financial situation. The safest option is to choose one that is well within your budget. The Compulsory Excess applies to any claim submitted by the insured, as previously stated. If you notice this on your claim invoice, don't be shocked or frightened. We hope this blog was informative and interesting and provided you valuable knowledge regarding Compulsory and Voluntary Excesses. For information on other banking related aspects, feel free to check out our website.

By Om Chaudhary

28-Jun, 2021

Motor Insurance Related FAQ

Frequently Asked Questions

  • What is a Vehicle Insurance Plan's Validity?

    An auto insurance policy lasts for a year and must be renewed every year. If you fail to amend your contract, you will be given a one-month grace period to renew your auto insurance policy. This ensures that your plan's status remains active.

  • Third-Party Liability Insurance: What Is It?

    If you purchase third-party liability coverage, you will be covered for losses to a third party if your car is involved in an accident. It offers compensation in the event of a loss of life, physical injury, or material damage to a third party as a result of an accident caused by your vehicle.

  • Is Car Insurance Needed in the United Arab Emirates?

    To legally drive a vehicle in the UAE, we must have Car insurance.