In the article we will tell in simple words what a franchise is in insurance.
In the legislative framework of most countries, the term deductible applies exclusively to insurance. Moreover, in colloquial speech, it can be used both to determine individual conditions of the contract, and as a designation of the entire type of policy. What are the advantages and disadvantages of the franchise and what are the features of such a condition for the insured, you will learn below.
Services that are associated with property insurance of organizations or citizens are gaining increasing popularity at the present time, which indicates the formation of a responsible approach for owners of certain welfare objects. The purpose of insurance is to guarantee the safety and protection of property of citizens for a specified fee. A rather convenient way to do this is to use a franchise in the process of applying for some type of insurance, due to which you can reduce the total costs of the client and save the resources of the insurance company in recovering losses.
Description of the concept
So, we will understand in more detail in this matter and tell in simple words what is a deductible in insurance.
It is an obligation to compensate the insured person for part of the losses with personal funds in the amount established by the insurance agreement. Its value can be indicated both in monetary terms and as a percentage of the cost of the vehicle for insurance. The size of the franchise is agreed in advance between the client and the company and is prescribed in the agreement.
Not everyone knows what a deductible is in Casco insurance.
It can be conditional and unconditional. Explanation of lawyers: under conditional, when the loss due to insurance is not more than its size stipulated in the agreement, the insurer does not pay compensation. In the event that the loss is greater than the size of the deductible, it is fully reimbursed. The unconditional franchise is understood as the share of loss that is deducted from the total amount of compensation in the calculation.
An agreement or insurance rules determine the size and type of deductible. There are several types that depend on the conditions for its establishment.
Conditional
In accordance with its terms, when the amount of damage is less than or equal to the deductible, the insurance indemnity is not paid. If the franchise amount is exceeded, the damage is paid in full. For example, the amount of the conditional deductible by agreement is 10,000 rubles. When property is damaged for 10,000 rubles or less, no payment is expected. If the damage was valued at 10,001 rubles or more, the insurer will fully indemnify the damage. Currently, a contingent deductible is almost never applied.
Unconditional
Unconditional deductible in insurance - what is it? With an unconditional franchise, the amount of payments is always subtracted from the cost of damage. Thus, the client is given the difference between the size of the deductible and the amount of loss. For example, if the amount of the agreement is 20,000 rubles and the damage is assessed for the same amount, no compensation is made. With losses of 80,000 rubles, a citizen will receive 60,000. Currently, this is the most common type of insurance.
Temporary
The temporary franchise in the contract is indicated in units of calculation of time. In accordance with the conditions, no compensation for the insured event occurs if the insured event occurs before the specified time period. This type of deductible will be beneficial if the vehicle is not used during a certain season or when entering into health insurance agreements.
Dynamic
The size of the deductible in this type of insurance may change, depending on the number of insurance events. Damage in the first case is usually fully compensated, and in subsequent cases, certain percentages are deducted from the amount.
Franchise high
Very rarely used, mainly when signing large agreements. At the same time, the insurance company accompanies its client in court proceedings. Initially, the insurer fully covers the damage, then the client returns the deductible to the insurer.
The article has already been told in simple words what a deductible is in insurance; now it is worth familiarizing yourself with the advantages and disadvantages of such insurance.
Benefits and disadvantages
The franchise benefit for customers is based on the following factors:
- Savings due to lower insurance premiums (for example, if insurance is necessary only formally for a mortgage, then by setting the maximum deductible it is possible to spend the minimum amount on insurance payments).
- Temporary savings (with minimal damage from an insured event, there is no need to spend time on relationships with the company and fill out extra documents).
- If damage never happens, you will not need to spend extra money on paying insurance premiums.
- Franchise insurance will be beneficial when recovering large losses.
- During registration, the client is given a discount on the insurance policy, which is sometimes compared with the deductible amount.
For insurers, the franchise is beneficial because it allows you to reduce the size of insurance payments for customers. And employees are exempted from supporting minor insured events.
The disadvantage of the conditional or unconditional deductible of the insurance contract is the non-payment to the insured of a part of the amount that is intended to compensate for the loss. But this is a rather primitive opinion about the principles of the functioning of the service, the advantages of which can be quite tangible.
Where is the most commonly used deductible in insurance? What is it, in simple words, we have already said.
Auto Insurance Franchise
Very often force majeure situations occur on the roads. Financial losses associated with the consequences of the accident can be minimized by the proposal of insurance companies. There are two types of insurance for car owners:
- CTP. It is an obligatory type of citizens liability insurance . It is thanks to him that losses of third parties are most often covered. But if the policyholder is to blame for the accident, guarantees of vehicle repairs or reimbursement of expenses will be insignificant.
- Casco. Voluntary insurance, which is issued at the request of the client. It guarantees the maximum level of protection for car owners. Despite the rather high price of the Casco policy, you can find a lot of advantages. You can save on the cost of the policy thanks to the franchise. The policy provides for compensation for losses in the following cases: if an accident occurred, the vehicle was hijacked when an vandalism act was committed against a car.
You need to understand that not everyone benefits from the acquisition of a franchise in vehicle insurance, but only to owners under certain conditions:
- self-compensation of minor damage by the driver is assumed;
- car enthusiasts are usually very neat;
- the client does not want to bother, filling out small incidents.
Casco design options
There are two ways to apply for a policy:
- franchise reimbursement insurance;
- full option.
The price of a full policy, although it depends on several factors, is quite high. Executing a casco with a franchise in this case can reduce costs to a large extent. Its size is established by the parties and is mandatory in the agreement.
The following features of registration of insurance using a franchise are used:
- It is mandatory when the probability of complete destruction of the vehicle or its theft is high.
- In an accident, the deductible is usually 10% of the total insurance amount.
- The price of insurance is inversely proportional to the deductible.
- When a client applies for damages more than 1-2 times a year, this type of insurance will be unprofitable.
If the accident is serious, there can be two ways to compensate for the damage: the money is given to the client for the car repair minus the deductible, or he makes the deductible amount on his own to the insurer's cash desk, making the car repair in the company's service partner.
It will be difficult to issue an insurance policy together with a deductible in the following cases:
- transport is pledged;
- cars often get into accidents;
- the driver is inexperienced in driving.
Right choice
Russian car enthusiasts currently most often draw up a hull with a franchise of the unconditional type. To issue such a service, you only need to choose a reliable insurer who will make payments carefully. However, it is possible to dwell on other types of franchises, which depends on the selection criteria of the insured. Before signing the insurance agreement, it is advisable to verify the following information:
- What is a company (customer reviews, operating time).
- The attractiveness of the company and the relevance of the type of franchise and tariffs.
- Carefully read the contract, consult with insurers.
Pros of Casco with a franchise
The main advantage of an insurance contract with a conditional deductible is the fact that the driver will interact much less with the insurance company, which saves nerves and time. In addition, this fact will benefit insurance companies. The owner of the vehicle may not worry that he will not receive payment in the case when he made the repair himself.
Another plus is the reduction in the cost of the franchise policy. When the driver is neat and experienced, he will easily save a fairly large amount of money each year.
Thanks to the franchise, the cost of a full hull will be significantly reduced, including protection from complete destruction and theft of vehicles. In addition, the most experienced drivers are sure that if the owner is obliged to pay at least part of the losses on his own, he begins to drive more accurately and is less likely to get into an accident.
We said in the article in simple words what a deductible is in insurance.