Fire Sum Insured Recommendation
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To avoid under insurance deduction during a claim we strongly recommend that the Sum Insured indicates as follows:
Building, Furniture fixtures and fittings : Reinstatement value basis (i.e New for Old)
Plant ,Machinery, Equipment’s, Air Conditioners & Stabilizers, Generators, Transformer and accessories: New replacement value basis
Stocks : Market Value Basis
Under Insurance formula % = Sum Insured / New replacement value X100
Note: Depreciation is Not applicable if Sum Insured indicates reinstatement value
Sample of Market Value Settlement
Replacement value at the time of Loss 1,50,00,000Less Depreciation say 20% 30,00,000Value at Risk 1,20,00,000Sum Insured under the policy 75,00,000Cost of repairs & replacements 10,00,000LESS: Depreciation 20% 2,00,000Less: Salvage 25000Loss Assessed 7,75,000Under Insurance 37.5% 2,90,625Claim payable 4,84,375Policy Excess 10000NET CLAIM PAYABLE 4,84,375Sample of Reinstatement Value Settlement
Replacement Value at the time of reinstatement completion 1,50,00,000Sum Insured under the policy 1,50,00,000NO UNDER INSURANCE 0Cost of repairs & Replacements 10,00,000Less: Salvage 25,000Less: Policy Excess 10,000NET CLAIM PAYABLE 9,65,000Sample of any other Sum Insured chosen by the customer
Replacement value at the time of reinstatement completion 1,50,00,000Sum Insured under the policy 1,25,00,000Under Insurance by 25,00,000% of Under Insurance 16.67%Cost of Repairs & Replacements 10,00,000Less : Salvage 25,000Loss Assessed 9,75,000Less : Under Insurance 16.67% 1,62,533Loss after Under Insurance 8,12,467Less: Policy Excess 10,000NET CLAIM PAYABLE 8,02,467Sample Settlement of Claim in respect of Stocks
Market Value at the time of Loss 1,00,00,000Sum Insured under the policy 75,00,000Under Insurance by 25,00,000 i.e. 25%Claim assessed 10,00,000Less: Salvage 25,000Loss after deducting Salvage 9,75,000Less: Under Insurance 25% 2,43,750Loss payable after applying under insurance 7,31,250Less: Policy Excess 10,000NET CLAIM PAYABLE 7,21,250