Excesses, Deductibles and Franchises

Excesses, Deductibles and Franchises:

  Excesses:

                     This is the first part of each claim which the insured must bear, it only applies at the time of claim, hence if

                      there is not claim, there is no excess to pay.

             Compulsory Excesses: 

                             These are deducted for each and every claim and deducted from claim payment. They are meant to

                             avoid the insurer paying small or trivial claims. They can vary from £100 to £1,000 (for subsidence claims)

             Voluntary Excesses:  

                              In exchange for a premium discount, the insured can opt to take another excess. Should a loss occur,

                              the insured will be required to pay both.  In liability policies, this can be termed uninsured loss. Legal

                              expenses insurance can be purchased to recover such from a negligent third party.

            Deductibles:

                             This is usually a large excess, An insured (usually with a large commercial concern) may choose to act as

                             their own insurer for an agreed sum insured, thus seeking insurance protection above that limit.

             Franchises:

                           This was the first way an insurer used to make clients responsible for the first part of a claim

                           before excess was even created. How it operates? Any claim under a certain amount, the insured 

                           bears on his own, however for all claims above that limit, the insurer pays in full. Time 

                           franchises are found in benefit policies. The insured must wait a minimum number of days before

                           the policy will respond with compensation. Example for Renewals – 7 days, New Policies – 21 days