Car Insurance Voluntary Excess Meaning

Car Insurance Voluntary Excess Meaning: Understanding the Ins and Outs

Car insurance in Indonesia can be quite challenging to navigate, especially for those who are new to it. It can be confusing to pick the right insurance policy and understand the various terminologies used in the insurance industry. One such term is voluntary excess. In this article, we will discuss what voluntary excess is and how it works in car insurance.

What is Voluntary Excess?

Voluntary excess is an amount agreed upon by the policyholder and the insurance provider that the policyholder will pay towards a claim. This amount is over and above the compulsory excess that is already set by the insurer. Voluntary excess is an optional amount, and the policyholder can choose to have it or not.

For instance, if the policyholder has a voluntary excess of Rp 1,000,000 and makes a claim for damages worth Rp 10,000,000, the insurer will pay only Rp 9,000,000, and the policyholder will pay the remaining Rp 1,000,000. The voluntary excess can be any amount under the agreed limit set by the insurer and the policyholder.

Why Opt for Voluntary Excess?

Opting for voluntary excess can have some benefits. Firstly, it can lower the premium amount that the policyholder needs to pay. The amount of voluntary excess chosen by the policyholder will affect the insurance premium. The higher the voluntary excess, the lower the insurance premium. This is because the policyholder is bearing a higher risk, which reduces the insurer’s risk.

For example, if a policyholder chooses a voluntary excess of Rp 5,000,000, the risk for the insurer reduces, and the premium amount decreases, as compared to a policyholder who chooses a voluntary excess of Rp 2,000,000.

Secondly, choosing voluntary excess can also help reduce the number of claims made by the policyholder. For minor damages, the policyholder may choose not to make a claim if the amount of damage is less than the voluntary excess. This can help to maintain the policyholder’s no-claims bonus, which will result in lower premiums in the future.

What is Compulsory Excess?

Compulsory excess is the amount that the policyholder must pay towards a claim before the insurer pays the rest. This amount is set by the insurer and is non-negotiable. It is based on various factors such as age, car make and model, and driving experience.

Compulsory excess is calculated based on the insurer’s risk assessment. The higher the risk, the higher the compulsory excess. For example, a new driver with a sports car will have a higher compulsory excess as compared to an experienced driver with a family car.

The compulsory excess is usually lower than the voluntary excess, and the two amounts combined make up the total excess that the policyholder needs to pay, in case of a claim.

How to Choose the Right Voluntary Excess Amount?

Choosing the right voluntary excess amount can be tricky. It is essential to choose a voluntary excess that the policyholder can afford in case of a claim. It is also crucial to consider the value of the car when choosing the voluntary excess. If the car value is low, choosing a high voluntary excess may not be beneficial.

It is recommended to weigh the benefits of lower premiums against the potential cost of making a claim. A higher voluntary excess can save on the insurance premiums, but it may not be worth it if the policyholder ends up paying more in case of a claim.

Conclusion

In conclusion, voluntary excess is an optional amount that the policyholder can choose to pay towards a claim. It can help to lower the insurance premiums and reduce the number of claims made by the policyholder. However, it is essential to choose the right voluntary excess amount and consider the value of the car before making a decision. Understanding the voluntary excess amount and how it works can help policyholders make informed decisions when choosing their car insurance policy.