What is franchise insurance?

What is the insurance or insurance business?

It is a certain form of economic relations aimed at protecting the property interests of people from certain dangers. Insurance includes comprehensive insurance coverage, which consists of the insurance, coinsurance and reinsurance in the broad sense of the term. A prerequisite for the functioning of insurance companies is the licensing of insurance activities.  License entitling to engage in insurance is the guarantor of the solvency of the insurance company due to formed her necessary insurance reserves for the implementation of one or another kind of insurance for future insurance payments. Currently in Russia the mechanism, including the licensing of insurance activities, the registration of organizations engaged in insurance and control over their activities exercised by the insurance supervision. It protects the interests of policyholders. Licensing of insurance activity in Russia does not have any restrictions on the term of its action if it is not provided specifically by the Federal service for insurance supervision at the time of issuance of a specific license. Licensed as voluntary insurance, and mandatory.

Insurance, like many areas of business that includes a number of specialized concepts and terms. Insurance activity of insurers and policyholders involves a deductible, because it goes through each contract and stipulated in each product line of insurance.

What is franchise insurance?

Translated from the French franchise is a benefit.  Franchise insurance  –  it is not a recoverable part of the damage. It is calculated as a percentage of the sum insured. In other words, if the insured event had occurred then, when calculating the insurance indemnity, the excess amount will be deducted from the total payoff. The Russians, as a rule, try to abandon the franchise, unlike the foreign clients of insurance companies. We think it is excessive and not necessary, but if you think about it, everything is different. A deductible insurance gives you the opportunity to save money. The small size of the franchise provides more comprehensive coverage of damage but a high rate of insurance; the larger size of the franchise - less than full coverage of damages but reduces the cost of insurance.

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There are two kinds of insurance deductible: conditional and unconditional.

When a conditional or non-deductible franchise you to pay damages in the case, if it exceeded the size of the franchise, otherwise, payments from insurance companies to fail. For example, if a little corny, but just the perception that you have insured the shoes for the sum of 1 000 rubles with nominal 1% deductible that will be 100 rubles, and later lost the heel cap. The repair amount will be significantly less than the deductible, so the reimbursement will be. And in that case, if you do not lose the heel cap, and tore off the sole completely, then the cost of repair exceeds the deductible and the insurance company will compensate you for the damage. Since the reimbursement is made under certain conditions, the franchise and acquired the name “conditional”.

Absolute or deductible franchise is deducted from the amount of the payments for actual damage always, without any conditions. Therefore, projecting it on the earlier example, we see that with little damage payments from the insurance company will not, and with a significant of the actual amount to be paid in damages will always be deducted the deductible, i.e. in our case – 100.

If you evaluate the situation objectively, we see that the franchise in insurance for us the best. Not less favorable it is for the insurance companies, because for them also there is a real opportunity to save.