28-07-2017 03:25 PM - edited 28-07-2017 03:58 PM
What are the major deductions from a loss amount payable, in case of a loss by Fire or flood?
28-07-2017 03:33 PM
In case of a loss and / or damage payable in the insurance cover, following are the general deductions made from the loss payable.
Depreciation: As the building and contents are subject to wear and tear, and if the sum insured is selected on the basis of market value / depreciated value, loss payable are adjusted after deducting suitable depreciation from the loss payable.
Way to avoid depreciation à Insured may opt the sum insured on reinstatement value basis (instead of market value / depreciated value basis).
Salvage: This is the value of remains after the loss and hence will remain as it is.
Average: Based on the adequacy of sum insured (in comparison with the value at risk) in the insurance cover, Loss payable is adjusted in the same proportion as it bears between sum insured and value at risk. For example:- if reinstatement value of the building is INR 10 lakhs and same is insured for INR 5 Lakhs – it means that the owner is self insurer for 50% of the property. Any loss becoming payable, shall be paid adjusted to this percentile.
Excess: This is the minimum amount of loss to be born by the insured in case of a loss.
Premium For Reinstatement of Sum Insured for balance period of insurance policy: This is the pro rata premium deducted from the loss becoming payable. This is to maintain the total sum insured as it is in the insurance policy throughout the policy period.