In the event of damage, what does a franchise deductible indicate in an insurance policy?

A franchise deductible in an insurance policy is designed to specify the minimum loss threshold that must be met before coverage becomes effective. This means that if a policyholder experiences a loss, they must incur damages equal to or greater than the franchise deductible amount before the insurance company will start to pay for any claims. If the loss is less than this specified amount, the insurer is not obligated to provide coverage for the associated loss.

This type of deductible is often used in commercial insurance policies, especially in relation to specific risks or coverage types that may have higher thresholds for payout. Understanding the function of a franchise deductible is crucial for policyholders, as it directly impacts their financial responsibility when facing a loss.