---
title: "Franchise"
description: "Amount which in case of damage will have to be borne by the assured."
url: "https://oceancargo.co.uk/shipping-terms/franchise"
date: "2026-05-02T11:17:37+00:00"
language: "en-GB"
---

![Ocean Cargo](https://oceancargo.co.uk/images/GenPics/OCs-Customs-Brokerage.webp)

 # Understanding Franchise in Marine Cargo Insurance: Your Guide to Risk Management

## What is Franchise in Marine Cargo Insurance?

In the complex world of global freight, understanding your marine cargo insurance policy is paramount. One term that often causes confusion is "Franchise." Unlike a deductible (or excess), which is a fixed amount the assured always pays, a Franchise operates differently, offering a unique approach to risk sharing between the insurer and the assured.

Simply put, a Franchise in marine cargo insurance refers to a specified percentage or amount of loss. If the damage or loss to your cargo falls below this agreed Franchise amount, the insurer pays nothing, and the assured bears the entire cost. However, if the damage or loss \*exceeds\* the Franchise amount, the insurer pays the \*entire\* loss, as if no Franchise existed. This "all or nothing" principle is what distinguishes it from a standard excess.

For businesses relying on efficient and secure global supply chains, comprehending the nuances of Franchise clauses is crucial for effective risk management and financial planning. Ocean Cargo, with our extensive experience in [customs compliance](https://oceancargo.co.uk/services/customs-compliance/) and comprehensive freight solutions, helps clients navigate these intricate insurance terms to ensure their cargo is always adequately protected.

## How Franchise Differs from a Deductible (Excess)

It's common for clients to confuse Franchise with a deductible (known as an "excess" in UK insurance terminology). While both involve the assured bearing a portion of the risk, their application is fundamentally different:

- **Deductible (Excess):** This is a fixed amount that the assured \*always\* pays out of pocket for each claim, regardless of the total loss amount (as long as the claim is valid). For example, if you have a £500 excess and a £10,000 loss, the insurer pays £9,500, and you pay £500.
- **Franchise:** This is a threshold. If the loss is \*below\* the Franchise amount, the assured pays 100% of the loss. If the loss is \*above\* the Franchise amount, the insurer pays 100% of the loss. For example, if you have a £500 Franchise and a £400 loss, you pay £400. If you have a £500 Franchise and a £600 loss, the insurer pays £600.

This distinction is vital when assessing potential financial exposure and choosing the right insurance policy for your [sea freight](https://oceancargo.co.uk/services/sea-freight/) or [air freight](https://oceancargo.co.uk/services/air-freight/) shipments. Ocean Cargo advises clients on the most suitable insurance options, ensuring clarity on all policy terms.

## The Purpose and Benefits of a Franchise Clause

Why do insurers and assureds opt for a Franchise clause? It serves several strategic purposes:

### For the Insurer:

- **Reduces Administrative Burden:** It eliminates the need to process numerous small claims, which can be costly and time-consuming.
- **Discourages Minor Claims:** It incentivises the assured to manage minor damages themselves, promoting better [cargo handling](https://oceancargo.co.uk/services/specialised-services/specialised-packaging-handling "cargo handling") practices.
- **Manages Risk Exposure:** It allows insurers to focus their resources on larger, more significant losses.

### For the Assured:

- **Potentially Lower Premiums:** By agreeing to bear the risk of small losses, the assured may benefit from reduced insurance premiums.
- **Full Coverage for Major Losses:** When a significant incident occurs, the assured receives full compensation, providing crucial financial protection.
- **Simplified Claim Process for Large Losses:** For substantial claims, the "all or nothing" nature can simplify the payout process once the Franchise threshold is met.

Understanding these benefits helps businesses make informed decisions about their cargo insurance, especially when shipping high-value goods or managing complex [project logistics](https://oceancargo.co.uk/services/project-logistics "project logistics"), such as [excavators and diggers to the UAE](https://oceancargo.co.uk/countries/uae/excavators-diggers-uae).

## Types of Franchise Clauses

Franchise clauses can be structured in various ways, depending on the specific insurance policy and the nature of the cargo. Common types include:

- **Percentage Franchise:** The Franchise is expressed as a percentage of the insured value of the cargo or the total loss. For example, a 3% Franchise on a £100,000 cargo means the Franchise amount is £3,000.
- **Monetary Franchise:** A fixed monetary amount is specified as the Franchise. For example, a £500 Franchise.
- **Per Package/Per Item Franchise:** The Franchise applies to individual packages or items within a consignment, rather than the entire shipment. This is common for consolidated cargo or [LCL](https://oceancargo.co.uk/services/sea-freight "LCL") (Less than Container Load) shipments.

The specific wording of your policy is critical. Ocean Cargo always recommends a thorough review of all insurance terms, and our team is available to provide guidance on the implications of different clauses for your specific [road freight](https://oceancargo.co.uk/services/road-freight/) or intermodal shipments.

## Practical Implications for Your Shipments

When considering a marine cargo insurance policy with a Franchise clause, here are key practical implications for your business:

1. **Risk Assessment:** Evaluate the likelihood of minor damages versus major losses for your specific cargo and shipping routes. If minor damages are frequent but small, a Franchise might mean you bear many small costs.
2. **Financial Capacity:** Ensure your business has the financial capacity to absorb losses that fall below the Franchise threshold.
3. **Policy Wording:** Always read the fine print. Understand exactly how the Franchise is calculated (e.g., percentage of total value, percentage of loss, or a fixed amount) and what events it applies to.
4. **Claim Procedures:** Be aware of the documentation and procedures required to make a claim, especially when the loss is close to the Franchise amount.
5. **Consultation:** Discuss your specific needs with an experienced freight forwarder like Ocean Cargo. We can help you understand how different insurance options align with your risk appetite and budget, whether you're shipping [wind turbine components to Australia](https://oceancargo.co.uk/countries/australia/wind-turbine-components-blades-nacelles-tower-sections-australia) or general cargo to the USA.

Ocean Cargo's expertise extends beyond just moving your goods; we provide comprehensive support to ensure your entire logistics chain, including insurance, is robust and transparent. Our dedicated [sea freight services to Canada](https://oceancargo.co.uk/countries/canada/sea-freight-canada), for instance, are backed by clear advice on all aspects of cargo protection.

### Frequently Asked Questions About Franchise in Marine Cargo Insurance

#### Is a Franchise always a percentage?

No, a Franchise can be expressed as a percentage of the insured value or loss, or as a fixed monetary amount. The specific terms will be detailed in your marine cargo insurance policy.

#### Does a Franchise apply to all types of cargo?

Franchise clauses can be applied to various types of cargo and shipments, but their applicability and specific terms will depend on the insurer, the policy, and the nature of the goods being transported. High-value or fragile goods might have different Franchise arrangements.

#### Can I choose between a Franchise and a deductible?

Often, insurers offer different policy options, some with a Franchise and others with a deductible (excess). Your choice will depend on your risk tolerance, budget, and the specific advice from your freight forwarder or insurance broker. Ocean Cargo can help you explore these options for your [customs brokerage for the USA](https://oceancargo.co.uk/countries/usa/customs-brokerage-usa) and other services.

#### If my loss is exactly the Franchise amount, does the insurer pay?

Typically, if the loss is \*exactly\* the Franchise amount, the insurer will pay the full loss. The "all or nothing" rule usually applies when the loss \*meets or exceeds\* the Franchise threshold. Always confirm the precise wording in your policy.

### Ready to simplify your global logistics?

Get advice and a quote for your next shipment. Contact the Ocean Cargo team to start shipping.

[Freight Quote](https://oceancargo.co.uk/contact-us)

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