What is a deductible in insurance in simple words: description of the concept, calculation procedure, types

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

In the article we will tell in simple words what a franchise is in insurance.

In the legislative framework of most countries, the term franchise is used exclusively in the field of insurance. At the same time, in colloquial speech, it can be used both to determine individual terms of the contract, and as a designation for the entire type of policy. What are the advantages and disadvantages of a franchise and what are the features of such a condition for the insured, you will find out below.

Services related to the insurance of property of organizations or citizens are becoming increasingly popular at the present time, which indicates the formation of a responsible approach to the ownership of certain objects of their welfare among owners. The purpose of insurance is to provide a guarantee of the safety and protection of property of citizens for a fixed fee. In this case, a fairly convenient way is to use a franchise in the process of obtaining certain insurances, thanks to which you can reducegeneral expenses of the client and save the resources of the insurance company when indemnifying losses.

Description of the concept

So, let's take a closer look at this issue and tell in simple words what a deductible in insurance is.

It is the obligation of the insured person to compensate for part of the losses with the help of 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 under insurance. The amount of the franchise is negotiated in advance between the client and the company and is written in the agreement.

Not everyone knows what a Casco insurance franchise is.

It can be conditional and unconditional. Explanation of lawyers: under conditional, when the loss on the occasion of insurance does not exceed its amount specified in the agreement, the insurer does not pay compensation. In the event that the loss is greater than the deductible, it is fully reimbursed. The unconditional deductible is understood as the share of the loss, which is deducted from the total amount of compensation when calculating.

The insurance agreement or rules determine the amount and type of deductible. There are several such types, depending 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 compensation is not paid. If the deductible amount is exceeded, the damage is paid in full. For example, the value of the conditional franchise under the agreement is 10,000 rubles. When property is applieddamage of 10,000 rubles or less, payment is not expected. If the damage was estimated at 10,001 rubles or more, the insurer will fully compensate for the damage. Currently, the conditional franchise is almost never used.

Unconditional

Unconditional deductible in insurance - what is it? With an unconditional deductible, the amount of payments is always subtracted from the cost of damage. The client is thus given the difference between the size of the franchise and the amount of loss. For example, if the amount under the agreement is 20,000 rubles and the damage is assessed for the same amount, no compensation occurs. With a loss of 80,000 rubles, a citizen will receive 60,000. Currently, this is the most common type of insurance.

Temporary

Temporary franchise in the contract is indicated in units of time calculation. In accordance with the terms and conditions, there is no compensation for an insured event if an insured event occurs before the specified period of time. This type of deductible will be beneficial if the vehicle is not used during a certain season or when entering into he alth insurance agreements.

Dynamic

The size of the deductible in insurance of this type may change, depending on the number of insurance events. Damage in the first case is usually fully reimbursed, and in subsequent cases, certain percentages are deducted from the amount.

Franchise high

Very rarely used, mainly when signing major agreements. At the same time, the insurance company accompanies its client in proceedings incourt. First, the insurer fully covers the damage, then the client returns the deductible amount to the insurer.

The article has already been told in simple terms what a franchise in insurance is, now you should familiarize yourself with the advantages and disadvantages of such insurance.

Benefits and disadvantages

The franchise benefit for customers is based on the following factors:

• Save money through lower insurance premiums (for example, if insurance is only formally required for a mortgage, setting a maximum deductible allows you to spend minimal amounts on insurance payments).
• Temporary savings (with minimal damage from an insured event, there is no need to waste time on relationships with the company and fill out unnecessary documents).
• If damage never occurs, there will be no need to spend extra money on insurance premiums.
• Deductible insurance will be beneficial in recovering large losses.
• The client is provided with a discount on the insurance policy during registration, which is sometimes compared with the amount of the deductible.

For insurers, a franchise is beneficial because it allows you to reduce the amount of insurance payments for customers. And employees are exempt from accompanying minor insured events.

The minus of a conditional or unconditional deductible of an insurance contract is the non-payment to the insured person of a part of the amount that is intended to compensate for the loss. But it's pretty primitive.opinion on the principles of operation of the service, the benefits of which can be very tangible.

Where is the franchise most often used in insurance? What is it, in simple words, we have already told.

Deductible in car insurance

Very often there are force majeure situations on the roads. Financial losses associated with the consequences of an accident can be minimized thanks to the offer of insurance companies. There are two types of insurance for car owners:

• OSAGO. It is a mandatory type of civil liability insurance. It is thanks to him that the losses of third parties are most often covered. But if the insured is to blame for the accident, the guarantees for the repair of vehicles or reimbursement of expenses will be negligible.
• Casko. Voluntary insurance, which is issued at the request of the client. Guarantees the maximum level of protection for car owners. Despite the rather high price of a comprehensive insurance policy, you can find a lot of advantages. You can save on the cost of the policy just thanks to the franchise. The policy provides for compensation for losses in the following cases: if an accident occurred, the vehicle was stolen, when an act of vandalism was committed against a car.

You need to understand that not everyone benefits from purchasing a franchise for vehicle insurance, but only to owners under certain conditions:

• driver self-reimbursement for minor damages;
• car enthusiast is usually very careful;
• client doesn't want to mess around with smallaccidents.

Casco design options

There are two ways to issue a policy:

• deductible reimbursement insurance;
• full version.

The price of a full policy, although it depends on several factors, is quite high. Making a Casco with a franchise in this case allows you to significantly reduce costs. Its size is set by the parties and is mandatory prescribed in the agreement.

The following features of franchise insurance are used:

• It is required when the probability of complete destruction of the vehicle or its theft is high.
• In case of an accident, the deductible is usually 10% of the total sum insured.
• The price of insurance is inversely proportional to the deductible.
• If the 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 to repair the car minus the deductible, or he pays the deductible amount on his own to the insurer's cash desk, making car repairs in the company's partner service.

It will be difficult to issue an insurance policy along with a franchise in the following cases:

• transport is pledged;
• car often gets into accidents;
• driver is inexperienced in driving.

The right choice

Russian car enthusiasts currently most often issue hull insurance withunconditional franchise. To arrange such a service, you just need to choose a reliable insurer who will make payments accurately. At the same time, you can stop at other types of franchise, which depends on the criteria for choosing the insured. Before signing the insurance agreement, it is advisable to check the following information:

• What is the company (customer reviews, operating time).
• The attractiveness of the firm and the relevance of the type of franchise and tariffs.
• Carefully read the contract, consult with insurers.

Plus Casco with a franchise

The main advantage of an insurance contract with a conditional franchise is the fact that the driver will interact with the insurance company much less often, which saves nerves and time. In addition, this fact will also benefit insurance companies. The owner of the vehicle does not have to worry that he will not receive a payment if he made the repair himself.

Another plus is the reduction in the cost of a policy with a deductible. When a driver is careful and experienced, he can easily save quite a large sum of money every year.

Thanks to the franchise, the cost of a full hull insurance will be significantly reduced, which includes protection against the 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 himself, he begins to drive more carefully and is less likely to get into accidents.

We told in the articlein simple terms, what is a deductible in insurance.