CASCO with franchise: what is it, types, 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?

1. 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.
2. 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?

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

Definition of a franchise and its types

The concept of an insurance franchise is defined at the legislative level in the Federal Insurance Law. A deductible is an amount specified in the insurance contract, or it is a certain percentage of the amount of the cost of insurance compensation, or the cost of the car. Can be calculated in rubles and foreign currencies, US dollars and euros.

ATTENTION !!! The amount of the franchise is determined by the insurance contract and by agreement of both parties, the car owner and the insurer. If the client agrees to include a franchise in the contract, the car owner automatically receives a significant discount on the insurance premium.

The deductible can be unconditional (subtracted from the amount of compensation) or conditional (not deducted from the amount of insurance compensation).

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.

Types of franchises

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There are several types of deductibles common in car insurance. Each of them has a number of features on which its appropriateness in a particular situation depends. Let's look at these options in more detail.

What else to read:

• My car was scratched in the yard, what should I do?
• Europrotocol 2021
• How to get money instead of repairs under compulsory motor liability insurance: a detailed review

Conditional franchise

This option involves a fixed amount of damage, within which the policyholder repairs the car himself, without using the help of an insurance company. In the event that the amount of damage exceeds the established threshold, the insurer pays for the repair work in full, and the policyholder does not take any financial part in this.

For example, let’s take a CASCO policy, according to which the conditional deductible is 10 thousand rubles. If a driver gets into an accident and receives damage worth 7 thousand rubles, all work to restore the vehicle will be on him. If the expert opinion determines a large amount, for example, 14 thousand rubles, then the entire cost of repairs is paid by the insurance company.

Although this option involves benefits for both parties, in practice it is rare. This is due to insurers' fears of becoming victims of customer fraud. In order not to spend his own money on restoring the car, the policyholder can deliberately increase the degree of damage so that the amount received as a result is greater than the established deductible.

Unconditional franchise

The peculiarity of this option is that the owner of the car always takes part in its restoration after an insured event.

The level of participation of the car owner himself can be determined either as a percentage or in the form of a fixed monetary amount.

For example, if the unconditional deductible under the contract is 5 thousand rubles, this means that for each insured event the policyholder will pay for damage within this limit. That is, if the damage is estimated at 3 thousand rubles, the owner restores the car himself. If the damage exceeds the deductible and amounts to, for example, 20 thousand, the insurer pays for the repairs in full minus 5 thousand. That is, the policyholder is entitled to 15 thousand rubles.

If the deductible is calculated as a percentage, the damage that the policyholder must pay is determined by the established share. For example, the damage was estimated at 40 thousand rubles. If the deductible is 10%, then the insurer company reimburses 36 thousand, and the driver himself reimburses 4 thousand. The same thing happens with minor repairs. The size of the payment in this case does not matter, since regardless of this, two parties take part financially in restoring the car.

Temporary franchise

To save on a CASCO policy, a temporary deductible can be used. In accordance with it, insurance will be valid only for a certain period, which is established in advance. So, if the car is used exclusively on weekdays, insuring it on weekends does not make sense. The policy will be cheaper, but the insurance will not be valid at a certain time, and if the insured event occurs during these periods, the policyholder will not receive compensation. We can also talk about insurance for specific seasons, months and other time frames.

Dynamic franchise

This option is suitable for car owners who are confident in their skills and have sufficient experience. It involves taking into account the history of insurance payments and connects their number with the amount of insurance coverage. Thus, maximum compensation can be received upon the first occurrence of an insured event, and a recourse scale is applied to subsequent episodes. That is. With each subsequent request, the driver will be entitled to less compensation than the last time. The reduction rate is most often approximately 5% for each insured event.

In addition to these options, there are other franchises, but they are not very common. The most popular option in the Russian Federation today is the unconditional franchise option.

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.

What it is

CASCO deductible is an important feature of an insurance contract. It directly affects the cost of the policy. The higher the unconditional deductible, the lower the insurance premium the insured client will have to pay.

An unconditional deductible means a certain amount of money that the insurance client refuses when an insured event occurs.

For example, as a result of an accident, damage in the amount of 120 thousand rubles . The amount of the unconditional franchise specified in the insurance contract was 20 thousand rubles . In this case, the policyholder will receive an amount equal to the difference between these two values ​​- 100 thousand rubles .

The type of franchise in question has a large number of different advantages, which is why it is very popular.

The most important ones include:

• low cost of the policy;
• in the event of minor accidents, the damage from which falls within the deductible amount, no payments are incurred - this has a positive effect on the insurance history.

Experienced drivers, for whom accident-free driving is the norm, should purchase this kind of franchise.

Such clients, when taking out a CASCO policy with an unconditional deductible, simultaneously kill two birds with one stone: they avoid large expenses on the insurance premium and do not have to worry about death or serious damage to the car.

The size of the franchise of the type in question is determined as:

• some specific amount;
• an amount expressed as a percentage.

It is most profitable to use the specific amount agreed upon in the contract. This allows you to predict your expenses.

The deductible, expressed as a percentage, allows you to further reduce the amount of the insurance premium. But at the same time, it is less profitable in the event of an insured event.

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.

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

When concluding a car insurance contract, the client has the right to refuse and include additional franchise conditions. It is needed in the following cases:

1. There is a need to purchase a policy at a low price.
2. The car owner is confident in his driving experience.
3. In case of self-payment for minor repairs.
4. If necessary, insure movable property against theft and major damage.

Such insurance is very beneficial for professional drivers with extensive experience and a careful approach to driving. For such people, the franchise becomes a convenient opportunity to purchase a policy at a low price. For confident drivers who are willing to pay for minor repairs themselves, a deductible of 0.5 to 2% is beneficial. It is better to conclude insurance against major accidents and theft on terms exceeding 7 percent or more of indemnity.

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:

1. The damage caused to your car is assessed by both insurance companies.
2. Protocols and all possible certificates about the incident are drawn up for both companies and must be certified by the traffic police.
3. 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.

CASCO - a comprehensive method of car insurance

This policy implies voluntary registration. But for those who are going to buy a car on credit, the issue of applying for CASCO insurance is often tied to obtaining credit funds. Why is that? Everything is quite simple to explain. The loaned car is pledged to the bank until the car loan is repaid.

Even if the car is not a credit car, but is fully owned by the owner, unpleasant moments may arise at any time:

• Damage when parking,
• Damage from “well-wishers” in the yard,
• The elements dropped a tree on a car or an icicle simply fell from a house,
• A car caught fire
• Damage after an accident, etc.

All such and similar moments can be comprehensively insured in a CASCO policy and the car owner will receive full or partial compensation for damage. Why partially? Because the terms of the contract and individual factors of the incident will play a role.

Individual conditions will also be present when applying for a CASCO policy. That is, for different drivers the cost of the CASCO product will be different. Again the question is - why? The answer lies in the conditions for calculating the cost of a comprehensive car insurance policy:

• Driver's age
• Driving experience,
• Accident-free driving experience
• Number of drivers allowed to drive cars,
• Vehicle age,
• Availability of a car on the list of stolen cars,
• Availability and parameters of the anti-theft system,
• Availability of a DVR, etc.

As can be seen from the list of main criteria for calculating the cost of CASCO, they have a comprehensive approach, both in relation to the car and its owner.

For example, if a CASCO policy is issued by a forty-year-old owner who has a driving experience of 15 years, for which no insurance payments have been recorded. Apart from the owner, other owners are not allowed to drive a new Russian-made car.

In this case, there is a high probability that the cost of the CASCO policy will be calculated for the car owner at the lowest calculation coefficients. From which we can conclude that for careful drivers with experience, it is profitable to apply for CASCO.

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.

Pros of a franchise

Positive aspects of the franchise:

1. Saving money when concluding an insurance contract. If a client does not apply for compensation when an insured event occurs with a small amount of damage, there is no point in overpaying.
2. Reducing the number of calls to the insurance company. The fewer such situations, the more favorable conditions are offered when prolonging the contract.
3. An incentive for the correct behavior of the policyholder in order to eliminate the possibility of an insured event.
4. Opportunity to save time.

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.

What benefits are provided to car owners with this type of insurance?

So, it’s worth figuring out what benefits await drivers who have CASCO insurance with a franchise:

1. The price of the policy will drop significantly, by about half or even more. The owner will be able to save from three to twenty thousand rubles. Important: this is affected by the make of the car, year of manufacture, and length of service.

2. A law-abiding driver who follows all traffic rules receives a bonus in the form of a discount from the insurance company. If the driver confirms his driving without any incidents, then only he will receive bonuses. In the first year without an accident, the driver receives 5% on the policy with a deductible; for two years, the discount doubles; for three years of perfect driving, the driver receives 15%; Accordingly, for the fourth year of driving the discount reaches 20%. Of course, the organization is also not left without its own benefit from careful drivers. They give rewards for insurance, but the amount of payments to such car owners is small, and they rarely end up in an accident. And the insurance agency benefits from the fact that CASCO with a franchise eliminates minor accidents and other minor emergencies at the expense of the driver’s money. Drivers with little experience who drive foreign cars are not recommended to take out this type of policy. They will have absolutely no benefit. This is associated with large material costs.

Which type of CASCO franchise is better to choose?

Today, many insurance companies offer their clients not only an unconditional and conditional franchise, but also some others:

• dynamic;
• preferential

A dynamic deductible involves an increase in insurance compensation in the event of each new insured event.

For example, if no monetary compensation is paid for the first accident, then for the second it covers 50% of the damage, and for the third – 75%. Each insurance company offers different conditions.

A “preferential” franchise means the presence of any conditions under which compensation is not paid or, on the contrary, is paid.

The choice of a particular type depends on a large number of different factors. If the driver has an impressive experience of accident-free driving, then he should turn his attention to the conditional franchise.

Since it allows you to minimize the likelihood of incurring any losses as a result of an accident (in the absence of minor road accidents).

If the driver has little driving experience, then it is best for him to purchase a CASCO policy with an unconditional deductible. Since it will allow you to avoid a “bad” insurance history: the presence of minor accidents will make purchasing a CASCO policy for the next year significantly more expensive.

And at the same time, using a franchise will make it possible to slightly reduce the cost of insurance of the type in question.

The use of a preferential or dynamic franchise is justified only in some individual cases. For example, if the car is used quite rarely and the likelihood of an accident is low due to the seasonality of operation.

Each individual case should be considered separately; it is best to consult with an employee of the insurance company - it is in his interests to reduce the likelihood of the need for an insurance payment. At the same time, this factor can significantly reduce the cost of the policy.

Purchasing a CASCO policy with a deductible allows you to significantly save your money. This is important given the high cost of this type of policy today.

The franchise also makes it possible to avoid the need to collect a lot of documents in the event of a minor traffic accident.

Read about the cost of CASCO in the article: cost of CASCO. About CASCO 50/50 in the Alfastrakhovanie company is described here.

Information about poor-quality car repairs under CASCO can be found at this link.