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LSDefine
Simple English definitions for legal terms
franchise clause
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A quick definition of franchise clause:
A franchise clause is a rule in an insurance policy that says the insurance company will only pay for damages if they exceed a certain amount. If the damages are less than that amount, the person who bought the insurance is responsible for paying for them. This is different from a deductible, which always has to be paid by the person who bought the insurance. Once the damages exceed the stated amount in a franchise clause, the insurance company will pay for everything.
A more thorough explanation:
A franchise clause is a provision in an insurance policy that states the insurer will only pay a claim if it exceeds a certain amount. If the claim is below that amount, the insured is responsible for all damages. This is different from a deductible, which the insured always has to pay.
Let's say you have a car insurance policy with a franchise clause of $500. If you get into an accident and the damages are $400, you will have to pay for all the damages yourself. However, if the damages are $600, the insurance company will pay for the entire amount.
Another example is a homeowner's insurance policy with a franchise clause of $1,000. If your house is damaged in a storm and the repairs cost $800, you will have to pay for all the repairs. But if the repairs cost $1,500, the insurance company will pay for the entire amount above the $1,000 franchise.
These examples illustrate how a franchise clause works in insurance policies. It is important to understand the terms of your policy and how much you will be responsible for in the event of a claim.