The insurance deductible is the amount of money you will pay in an insurance claim before the insurance coverage kicks in. Like if your deductible is US $300 and your claim is US $2000, company will ask you to pay US $300 and then the rest will be paid by the company. Once you pay your deductible the insurance company will pay you the rest of the claim value up to the policy limits.
A deductible protects the insurance company against unnecessary and large number of small claims (hence saving paper work, time and money). This also ensures that people are more careful with their vehicles since they have to pay a part of the expenses.
There are two types of deductibles:
Compulsory Deductible (or Compulsory Excess) is a fixed amount set by insurance companies. Compulsory deductible or excess for car insurance is the amount that is mandatory deducted by insurance companies on each and every claim you make. It is a fixed amount that depends on the type of vehicle.
An insurer can charge a higher deductible if the car is older and thus presents a higher risk of claim. Compulsory deductible does not affect the premium in any way. The premium is based on other aspects such as Insured Declared Value (IDV), make and model.
Voluntary Deductible (Voluntary Excess) is an optional limit chosen by you to meet a part of the claim from your own pocket before raising it to the insurer. You can opt for a voluntary excess for your car, over and above the compulsory excess. It is a deductible that you are willing to bear voluntarily.
A voluntary deductible has an inversely proportional relationship to your premium amount. Higher the voluntary deductible, lower the premium.