Insurance Franchise

Table of contents

The franchise in insurance is nothing more than a share of deductible money by the insurer on a possible indemnity resulting from a claim, and which shall be borne by the insured. .

It implies, therefore, that the insured will have to pay that amount, either by not receiving it or by being obliged to pay it to a possible injured party.

The insurance excess is usually applied in different types of insurance and guarantees, and generally means an improvement in the price of the insurance contracted, since the insured will participate in the economic consequences of a possible claim.

Below, we detail the most common types of insurance and guarantees that may contain excesses:

Motor and other vehicle insurance

Attention should be paid to the application of franchises in the guarantees of theft and/or fire. Although not very common, some insurers do apply them, especially in motorbike insurance.

On the contrary, it is very frequent in the guarantee of own damage o all risks. In these cases, there is usually an improvement in the price of the insurance, but it is important to understand how the excess is applied to avoid surprises.

The price of comprehensive insurance with excess also depends on the amount of the excess. The higher the excess, the lower the cost of the insurance.

For example, imagine that you take out comprehensive insurance with an excess of €200 per claim.

A few months later, your vehicle suffers various damages: scratches on the rear bumper, damage to the driver's door and a collision with another vehicle for which you were at fault. You decide to report the damage to the insurance company to repair all the damage. The total value is:

Damage to the front: 650 €.
Rear bumper damage: 250 €.
Damage to driver's door: 200 €.
Total: €1,100

It would be easy (and wrong) to think that you will pay only €200 and the insurer €900. However, the loss adjuster will determine the number of claims and applicable deductibles. Generally, each damage is treated individually:

Damage to the front: 650 € - Policyholder's share: €200, insurer: €450.
Rear bumper: 250 € - Policyholder's share: €200, insurer: €50.
Driver's door: 200 € - Policyholder's share: €200, insurer: €0.

Final result: insured pays €600 (200 + 200 + 200), insurer €500 (450 + 50).

Civil Liability Insurance

Franchising in civil liability insurance is common. Not so much in compulsory insurance, but it is important to know if the insurance contracted includes it, and in what amount.

It is very common in professional liability insurance, general, for dangerous dogs, for water damage in communities, for horses, for machinery, etc.

In these cases, although the insurer deducts the excess from the compensation, the injured party is usually a third party. Therefore, the insured person must pay the part that the insurer does not cover.

For example: if your insurance has an excess of €300 and a third party claims a damage valued at €850, the insurer covers €550 and you must pay the remaining €300 to the injured party to complete the compensation.

Building or Community of Owners Insurance

Franchising in community insurance is also frequent, especially in the case of water liability and water damage guarantees (search, location and repair of the damage).

It is particularly applicable when the building is of a certain age. It is less common in new buildings, but is always offered as an option to reduce the cost of insurance.