Insurance with franchise

Franchise (Excess) is release of the Insurer from obligations to reimburse losses limited by certain amount provided by the conditions of insurance agreement. Franchise is a form of the Insured’s own participation in losses defrayal. As a rule, it is applied in those cases when the Insured’s losses are relatively small. Franchise influences reduction of insurance premium.

Conditional franchise (non deductible franchise) is independent losses defrayal by the Insured if the amount of losses is less than franchise amount; and full reimbursement by the Insurer if the amount of losses exceeds franchise amount.

Unconditional franchise (deductible franchise) is franchise deductible from any amount of losses. Unconditional franchise is absolute amount or percentage subjected to deduction from the amount of insurance compensation according to the insurance conditions.

Usually unconditional franchise is applied for big and dangerous risks stimulating the Insured to take more care about insured property.