What is insurance or insurance business?
This is a certain type of economic relationship aimed at protecting the property interests of people from certain dangers. Insurance activities include comprehensive insurance coverage consisting of insurance itself, co-insurance and reinsurance in the broad sense of the term. A prerequisite for the functioning of insurance organizations is the licensing of insurance activities. Licenses that give the right to carry out insurance are the guarantor of the solvency of the insurance company due to the necessary insurance reserves formed for it to carry out this or that type of insurance for future insurance payments. At present, Russia has a mechanism in place, including licensing of insurance activities, registration of organizations involved in insurance, and control over their activities by insurance supervision. All this together provides protection for the interests of policyholders. Licensing of insurance activities in Russia does not have any restrictions on the duration of its validity, unless this is specifically provided for by Rosstrakhnadzor during the issuance of a certain license. Both voluntary and compulsory insurance are licensed.
Insurance, like many business lines, includes a number of specialized concepts and terms. The insurance activities of insurers and insurers necessarily include a deductible, as it goes through each contract and is negotiated in each product from the insurance line.
What is a franchise in insurance?
Translated from the French franchise, this is a privilege. A deductible in insurance is not a reimbursable part of the damage. It is calculated as a percentage of the sum insured. In other words, if an insured event occurs then, when calculating insurance compensation, the deductible amount will be deducted from the total payment. Russians, as a rule, try to refuse a franchise, unlike foreign clients of insurance companies. It seems to us superfluous and unnecessary, but if you think about it, then everything is completely different. A deductible in insurance provides an opportunity to save. A small deductible provides a more comprehensive coverage of the damage, but a high insurance rate; a larger deductible is less complete damage coverage, but reduces the cost of the insurance policy.
There are two types of insurance deductible: conditional and unconditional.
In case of a conditional or non-deductible deductible, you will only be indemnified if it has exceeded the deductible, otherwise, you will not be able to receive payments from the insurance company. For example, even if it’s somewhat corny, but just to the perception, you insured shoes in the amount of 1,000 rubles with a conditional 1% deductible, which would be 100 rubles, and a little later lost your heels. The amount of repair will be significantly less than the deductible, so there will be no refund. And in the event that you did not lose the heel pad and tear off the sole completely, then the repair cost will exceed the deductible amount and the insurance company will fully compensate you for the damage. Since reimbursement is made under certain conditions, the franchise also acquired the name “conditional”.
An unconditional or deductible deductible is deducted from the amount of payments for real damage always, without any conditions. Therefore, projecting it onto the previously given example, we see that for insignificant damage there will be no payments from the insurance company, and for a significant amount of the deductible, the deductible amount will always be deducted, i.e. in our case - 100 rubles.
If we evaluate the situation objectively, we see that the franchise in insurance is beneficial for us. It is no less beneficial for the insurance organizations themselves, since they also have a real opportunity to save.