What Is Franchise Insurance policy

What Is Franchise Insurance policy and How Treats Work?

Franchise covers, also known as trigger cover, is a reinsurance policy that allows the claims from different policies are combined into insurance claims. The franchise cover restricts the amount of insurance offered to an insurance company ceding.

What is franchise insurance policy?

A franchise insurance policy is a form of reinsurance offered by reinsurers. There are different franchise insurance policies, including captive insurance, cycle reinsurance, and business interruption insurance. Franchise policies generally cover the following types of property and liability perils, perils such as:

Political risks and duties

Operation/service risks

Integrity, competence, and reliability of the franchisee

Financial risks of the franchisor

Operational risks

Misfires or accidents

Financial interest risks

The major types of policy coverages offered by reinsurers include loss of earnings, executive protection, financial insurance, operational insurance, and more.

The value of the franchise cover depends on the nature of the franchise agreement.

What is the purpose of a franchise insurance policy?

The purpose of a franchise cover is to offer greater protection for the franchisee’s claims against the franchisee’s insurance carrier in an insured event. When the policy is assigned to the franchisor as the claim servicer, the franchise cover company can provide the same level of insurance coverage as the franchisee, which can offer the business owner peace of mind.

However, the costs associated with developing a franchise insurance policy are similar to a traditional insurance policy, which could offset any benefits from the franchise cover.

Types of Franchise Insurance Plans

The following three types of franchise insurance cover many aspects of the franchise business. They could conceivably be suitable for a wide range of endeavors

What types of claims may a ceding insurer include in a franchise insurance policy?

Reinsurance claims under the franchise cover can be subrogated and distributed among different ceding insurers. A ceding insurer may be a policyholder insurer or a reinsurer. If a franchise cover is arranged for a retailer with several stores, the insurance contract will specify how the company may be covered and receive reimbursement. If a franchise cover is arranged for a fast food outlet with only one store, the insurance contract will specify how the company may be covered and receive reimbursement.

There are three general classes of reinsurance claims:

Reinsurance claims to cover loss due to the insured company’s purchase or sale of a large property or any of its partners.

Reinsurance claims due to the transfer of an existing insurance contract with any ceding insurers.

How much reinsurance can a ceding insurer with a franchise insurance policy?

A ceding insurer’s reinsurance is not limited by a franchise cover. However, a ceding insurer can obtain multiple reinsurance policies from different reinsurers to meet the needs of their clients.

If a franchise cover is provided, how does that impact the premium payment?

The franchisor, the franchisee, and the reinsurers of the franchise cover share a portion of the premium costs. Depending on the premium cost, franchise cover can be as high as 15%. However, you need to know that the liability of the franchisor and the franchisee will not be covered under the franchise cover. In case of a claim, the liability of the franchisor and the franchisee will be paid by the ceding insurer.