CASCO with franchise: what is it, pros and cons

In any unclear situation, talk about the franchise.

In 2021, we are faced with business franchises - Pyaterochka, SDEK, Ozon, Black Star Burger; film franchises – “Harry Potter”, “John Wick”, “Saw”; franchises in literature - “The Hunger Games”, “Game of Thrones”.

But the concept of “deductible” is no less common when it comes to insurance. And given that insurance policies are found at every step - car insurance, life insurance, real estate insurance, bank deposit insurance, etc. – knowing what a deductible in insurance is is useful for everyone.

What is a deductible in insurance in simple words?

In insurance, the deductible is that part of the damage that the insurer does not pay you. It is agreed upon in advance and specified in the insurance contract.

The simplest example: you want to buy a CASCO insurance policy (voluntary insurance) for your car and enter into an agreement with it. Under this agreement, in the event of damage, you will receive compensation from Fear and Co. for this damage in the amount of up to 1 million rubles.

But such a policy is expensive. And you drive carefully. Playing it safe is useful, but not for the same amount! What should I do? How to reduce the cost of an insurance policy?

That's what a franchise is for. The contract that you conclude with states that if the damage is caused in an amount less than 50,000 rubles, the insurer will not pay you anything. You'll manage somehow.

Why do you need this?

Such a deductible in the insurance contract will reduce the cost of the entire insurance policy. And you won’t be so sorry to give your money away if you usually drive carefully.
In case of minor damage (for example, your bumper was simply scratched), you will repair the car yourself, but this damage will not affect the cost of your next policy (usually compensation for damage leads to the fact that the next policy is more expensive).

Why does the insurer need this?

Ability to meet the demand of more customers
The ability not to deal with minor problems, which also leads to savings.

Types of deductibles in insurance. Conditional and unconditional franchise.

Before moving on to an analysis of the main types of franchises in insurance, we hasten to warn you that each insurance company has the right to develop its own conditions under its own contracts. Therefore, when concluding an agreement with an insurance company, always study your conditions in detail. Including those items that relate to the franchise.

Franchises by type of calculation of the amount paid:

Franchise with a fixed amount . Regardless of the size of the damage, the insurer does not pay a specific amount. This amount can be indicated both in convertible currencies (dollar, euro) and in national currency (usually indexation is prescribed for long-term contracts).

That is, if you entered into an agreement with, where a franchise of 50,000 rubles is stated, then no matter what damage was caused to your car - 150 or 900 thousand, the company will not reimburse you exactly 50,000 rubles.

Franchise with a percentage of the amount of losses. In this case, the amount of the unpaid amount will depend on the extent of the damage. Typically, the rate is set by the insurer. But there are options for a regressive rate, which is chosen by the policyholder so that he can influence the final cost of the policy.

That is, if you have an accident, the amount of the unpaid amount under the insurance contract will depend on the amount of damage that will ultimately be calculated.

Franchises by type of contract execution with benefits:

Conditional franchise . In this case, the contract specifies a certain amount of the franchise. And if the amount of damage is less than this established amount, then the insurer does not pay anything. But if the amount of damage is greater than the deductible amount, then he pays the entire cost of the damage.

For example, you insured your car, and your deductible amount under the contract is 120,000 rubles. If you have an accident and the amount of damage is 115,000 rubles, then you will not receive anything at all. But if the amount of damage is 121,000 rubles or more, then Strakh and Co. will pay you the entire amount.

Temporary franchise . Almost the same as a conditional franchise. But the main factor here is time - the period that stipulates the insurer’s right not to pay you insurance.

That is, if your franchise in the agreement with Strakh and Co. is temporary and it is stated that it expires three months after the conclusion of the agreement, then everything will depend on when you had an accident. If these three months have passed, the company will pay you the amount of damage. But if three months have not yet passed, you can’t count on payment.

Unconditional franchise. In this case, the amount indicated as a deductible is not paid to you in any case, regardless of anything - neither the circumstances nor the time. It is valid for the entire duration of the contract.

Dynamic franchise. In this case, the amount that the insurance company does not pay you in case of damage depends on the conditions previously agreed upon and specified in the contract. So, often with a dynamic deductible, with each new insured event, the percentage of the unpaid amount increases.

High deductible. This type of franchise is found only in those contracts, the payment under which should be a large amount.
Standard – at least 100 thousand dollars. The principle of a high deductible is as follows: in the event of damage, the insurer pays its entire cost. However, after the damage is repaired, the policyholder will have to pay “back” the part that is specified in the contract as a deductible.

Unscrupulous insurance companies. Franchising is a scam.

Ever since insurance entered the everyday life of Russians, it has become customary to believe that multi-page contracts may contain the so-called “fine print”, which in the mind recalls as an attempt to introduce conditions that are beneficial to the insurer and completely unprofitable for the average user.

And actually for good reason. But the conditions may not be in the fine print. But legal language is so alien to the common man that no fine print is needed. Sometimes the conditions for the provision of insurance services are described so strangely that you and I prefer not to delve into the essence, hoping for chance. But in vain. Because insurance companies may well use it.

The most common use of such “deception” is in the advertising companies of insurers. For example, in advertising, an insurance company may focus on the so-called zero deductible (that is, the insurer, in theory, undertakes to fully compensate for the damage in an insured event). The essence of the “trick” is that this is actually ordinary insurance. And it will cost more, because a zero deductible is an extremely unprofitable thing for the insurer. That is, in fact, there is no deception, but the benefits of the “zero franchise” lure new clients through an advertising campaign.

An equally common case is the inclusion of a zero deductible only in specific cases (which are unlikely). But the advertising company does not talk about this, and the entire insurance package is presented as very cheap and profitable. In fact, it turns out the other way around.

Penalty deductible. Another type of tactical obfuscation. Most often it occurs in cases of car theft and complete “destruction” of the vehicle under certain circumstances. At the same time, the size of the deductible (unpaid amount) is usually very high.

That is, you insured the car, but did not pay attention to the fact that in the event of theft or complete destruction, a penalty deductible begins to apply under your contract. Or they did, but didn’t pay any attention to it, because, god, who needs to drive away my old lady, and I drive carefully. And then the opportunity comes. And... and you receive as a payment from the insurance amount far from the full cost of the car. And you can't do anything about it.

In general, be careful. You must understand everything that is stated in the contract as clearly as possible before signing.

How to conclude an insurance contract with a franchise

To conclude a CASCO insurance agreement with a franchise, you can use the services of one of the trusted insurers on the insurance market. Large insurance companies have long established themselves. Ingosstrakh, which has been operating in the insurance market since the 2000s, operates in more than 80 regions of the country. Insurance company Reso-Garantiya, operating in the country for more than 25 years.

To correctly determine the deductible amount, you should pay attention to the following factors:

the amount of insurance compensation in the event of an insured event,
franchise percentage,
what type of franchise is chosen.

For example, the insurance amount is 500 thousand rubles, the deductible is 0.1% of the insured amount, the desired result is 500 rubles. The deductible can be calculated based on a percentage of the calculated amount of loss, for example, the damage caused to the car is 50 thousand, the deductible is 5%, then the deductible amount will be 2,500 rubles.

What type of franchise to choose and for what amount should be decided by the policyholder.

In which insurance policies is there a deductible?

It’s sad, but most often insurance policies (car, or those required for traveling abroad) are purchased not because a person really wants to protect himself, but because the rules require it. Naturally, the cheaper such a policy is, the better for a person. After all, if it were up to him, he wouldn’t buy it at all. But where to go?

Therefore, the possibility of including a franchise in such a policy is being considered with enthusiasm. After all, it helps the policyholder save money. Well, insurers are not against it. So even better.

Most often, the deductible is found in four types of policies:

CASCO. Motor vehicle insurance policy.
OSAGO. Driver's civil liability insurance policy.
Life and health insurance policies for citizens who plan to travel abroad.
Insurance policy for collateralized property under a mortgage agreement.

In the case of life and health insurance for travel abroad, the deductible, as a rule, is conditional (if the insured event is less than the deductible amount, the insurer does not pay anything, and if it is more, it pays everything) with a fixed cost. And in 99.9% of cases, the franchise size is quite large. For what?

It's simple. Do not forget that it is not profitable for the insurance company to pay you insurance in any case. And when the deductible is conditional and also large, most often the insurer does not pay anything. Because people, even if they are injured abroad, are not critical and for an amount that is less than this deductible. Accordingly, there is no need to pay for such numerous cases.

Dynamic franchise

There is also such a type of franchise as dynamic, when the franchise appears and increases depending on the number of road accidents in which the insured car was involved.

IMPORTANT !!! For example, an accident occurred, the first one after receiving an insurance policy. Then the deductible is 0%, and the insurance company will fully compensate for the damage caused to the vehicle.

After the second accident, the deductible amount will be 5% of the amount of insurance compensation, and the insurance company will pay for car repairs, according to the calculation rules.

When the third or more insured events occur during the insurance period, the deductible amount is 7% of the amount of insurance compensation.

In fact, the deductible begins to work with the occurrence of the second accident, regardless of what risk the car is insured against.

In cases where the insurance rules and the concluded contract stipulate other amounts of deductibles for risks such as “theft” and “damage,” then the deductibles are summed up.

A dynamic franchise is very convenient and profitable to insure novice drivers.

How to return the franchise?

The return of the franchise is also provided. But not everywhere and not always. Most often, such cases occur in car insurance when it comes to a CASCO policy. However, even there, in order to return the franchise, many conditions will need to be met. And the main thing is that you should not be the culprit of the insured event. Because the cost of the deductible, as a rule, is reimbursed by the insurance company at fault.

Example. You purchased a CASCO policy from. The franchise under the agreement is 20%. That is, in case of damage, 20% of its cost will not be covered. And after that you get into an accident that occurred due to the fault of another driver, who only had a compulsory motor liability insurance policy, which he took out in.

The damage was estimated at 400 thousand rubles. In this case, it pays you 80% of 400 thousand rubles. That is, 320,000 rubles (because there is a franchise). But the insurance company can pay you the remaining 20% (that is, another 80,000 rubles).

To implement such an example in practice, the following conditions will need to be met:

The damage caused to your car is assessed by both insurance companies.
Protocols and all possible certificates about the incident are drawn up for both companies and must be certified by the traffic police.
An application for compensation is prepared in two versions. The first is to receive compensation under your CASCO policy for your insurance company. The second is for the return of the OSAGO franchise for the insurance company of the person at fault in the accident.

And then there are also nuances. For example, an application for a refund can be submitted within three years from the date of the incident. However, if up to this point the damage has already been repaired, you are unlikely to succeed and you will not see any money.

And if the culprit of the incident is not identified, then the issue of returning money under the franchise is generally referred to the court, like other claims.

Pros and cons of insurance with a deductible

What are the benefits for the policyholder:

Reducing the cost of the insurance policy. As a rule, policies that include a deductible cost 10-15% less than full policies. Again, if you take out a policy only because it is a prerequisite (for example, to travel abroad), using a deductible can save you money.
Reducing processing time and number of documents. Since the insurance company, if a deductible is included in the policy, risks less with its finances, it is easier to issue such a policy. This often requires fewer documents, and the verification process is faster.

What are the advantages for the insurance company:

In case of an insured event, the company will pay a smaller amount. That is, less expenses. And in some cases, you will even be left with your money.
Cases of minor damage, which, thanks to the deductible, fall on the shoulders of the policyholder, are crossed out. And this means less waste of all resources – both man-hours and finances.
Opportunity to attract more clients due to lower policy costs.

What are the disadvantages for the policyholder:

Compensation in the event of an insured event is less, and sometimes completely absent.
Difficulties of a bureaucratic nature that the policyholder faces when trying to receive compensation under the policy.
When it comes to insuring expensive objects, the amount of minor repairs may be higher than the premium for full insurance. In other words, you had to immediately buy a policy without a franchise, because repairs at your own expense are now more expensive.

What are the disadvantages for the insurance company:

This can be argued, but the main disadvantage for the insurance company is the overall decrease in cash flow that goes to their cash desk.
They also highlight the possibility of reducing the reputation of the insurance company, because clients, as a rule, are not very happy when they do not receive their insurance money due to the deductible, although they themselves signed an agreement with such conditions.

Why is it beneficial to include a deductible in a CASCO insurance contract?

The benefits of concluding an insurance contract with a franchise are available in the following cases:

for drivers with short driving experience, insurers use the highest risk coefficients for this category, and the cost of the premium increases sharply,
the car owner has extensive driving experience and drives the car carefully,
great time savings, when insured events occur, when the amount of insurance compensation is low, payments are not made under the insurance contract, but the driver acquires an accident-free record, which greatly influences subsequent insurance contracts, and can repair minor breakdowns with his own funds,
an insurance contract has been concluded for the risk of “theft”, with a maximum deductible amount; such insurance also compensates for the risk of car loss or serious damage.

Bottom line

Understanding what a deductible in insurance is is important. Even if you have never encountered this concept before, you most likely will someday. All insurance services - auto, life, home, etc. insurance policies - all services in one way or another may contain special banking conditions that help reduce the cost of policies. And it is extremely important to understand exactly what you are risking by agreeing to a policy with a deductible. And for this you need to understand what a franchise means.

With knowledge, you can analyze the need to take out a policy with a deductible from the point of view of overall benefit, rather than immediate benefit. Because, as a rule, the discount on an insurance policy that appears when a deductible is included in it does not allow you to think about the possible consequences. And in the end the “overpayment” turns out to be higher.

But most importantly, by understanding how it works and how it should work, you will be able to distinguish fraudulent schemes and feel more confident in receiving compensation for insurance claims.

That's all. We have figured out the questions “what is a deductible in insurance” and “what is it for?” And now, we recommend that you broaden your horizons even more and find out what a franchise is in business, and maybe even choose a suitable franchise for yourself using our franchise catalog, or the national rating of franchises.

In what cases is it profitable to issue CASCO insurance with a franchise?

It’s not hard to guess what the insurance company’s interest is in selling insurance with a franchise: by freeing itself from small payments, the insurer saves resources. It is no secret that processing such applications does not justify itself financially. Assessment, investigation and other support of minor insurance episodes consume resources that often exceed the cost of the damage itself. Therefore, it is more profitable for insurance companies to shift minor damage to the car onto the shoulders of the client in exchange for a discount on insurance.

However, this option is not always beneficial to the car owner. When assessing the feasibility of insurance with a franchise, driving experience, the purpose of insurance, the mode of use of the vehicle and the terms of the contract themselves will be of great importance. Each specific case requires careful study by the car owner. However, there are several general recommendations that will help you decide whether to connect to this service.

When is CASCO insurance with a deductible beneficial?

With significant accident-free driving experience. When the likelihood of an accident is extremely low, there is no point in overpaying for insurance. In addition, insurance companies are interested in problem-free clients and try to retain them with all kinds of bonuses and discounts.
When the main purpose of purchasing a CASCO policy is theft insurance. In this case, the deductible will help to significantly save on the cost of insurance.
If the amount of the discount on the policy exceeds the amount of the deductible.
If you have available funds sufficient to independently repair minor damage. For those whose time is valuable, insurance with a deductible is an ideal option.
If the driver is interested in maintaining an accident-free record. Minor accidents can significantly worsen this indicator and negatively affect the cost of future insurance.

It is not recommended for novice drivers to be tempted by a franchise. It is believed that the likelihood of getting into minor accidents in the first two years of driving is very high. The same applies to other drivers who receive 2 or more insurance claims annually - for them, insurance with a deductible will also be unprofitable.

Let's sum it up

Summarizing the above, it can be noted that a franchise is an excellent way to save on CASCO insurance for experienced drivers with an impressive track record of accident-free driving. Of course, no one is insured against accidents, so when buying a policy with a deductible, you need to be prepared to make minor repairs on your own. But if troubles pass by, you get undeniable benefits in the form of a significant discount on insurance, while maintaining protection from large expenses.

And in addition to the above, we suggest watching a video about the features of purchasing CASCO policies with a deductible.