Page 151 - DMGT515_PERSONAL_FINANCIAL_PLANNING

Personal Financial Planning

Notes including stocks at suppliers/customer’s premises, machinery temporarily removed from
the premises for repairs can be insured.
The fire insurance policy has been renamed as standard fire and special perils policy.

(b) Reinstatement Value Policies: In this policy, the settlement of claims is on basis of
reinstatement value. The claim amount will not be found adequate by the insured that
desires to replace the property by a new one of the same kind, type or capacity.
Insurer will pay the value, which takes into account depreciation, wear and tear, but also
the replacement cost. Thus the losses will be settled on the basis of market value of the
property on the date of fire.
The difference between the amount payable on the basis of market value and the new
replacement value will become wider and wider, particularly when due to inflation, the
dxacost of rebuilding and the prices of the machinery show a sharp increase.
Under the policy, the insurers pay, not the depreciated value but, the cost of replacement
of the damaged property by new property of the same kind. The sum insured is required
to reflect the new replacement value and not the market value as under the normal fire
policy.
(c) Policies for Stocks
There are three types of policies for stocks.

Floater Policies
1. Stocks at various locations can be covered under one sum insured through floater
policies, since these policies take care of frequent changes in sum insured at various
locations.
2. These cover stocks for a single amount situated in more than one specified building
located (1) within the limits of one city/town/village, (2) more than one city/
town/village but maximum in 50 locations, (3) for more than 50 locations in various
cities/towns/villages. The floating policies are not issued to transport contractors
and cleaning and forwarding agents.
3. Floating policies for risks situated within the limits of one city/town/village may
be issued by charging 25% loading, over and above the highest rate applicable to
any one risk. 50% loading over and above the highest rate applicable to any one risk
is charged under policies covering upto 50 locations in more than one city/town/
village.

4. The maximum sum insured at any one location should not be more than 10% of the
total sum insured.
5. The insured should essentially have a good internal audit and accounting procedure
under which total amount of risk and location can, if required, be established. The
condition of average is applied to the limit of sum insured at each location, and also
to the total sum insured under the policy.
A policy issued to cover more than 50 locations in various cities/towns/villages in one
amount is subject to the under noted regulations:
(a) Total sum insured in respect of all locations should not be less than ` 3 crore.
(b) The maximum sum insured at any one location should not be more than 10% of the
total sum insured.

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