Page 152 - DMGT515_PERSONAL_FINANCIAL_PLANNING

Unit 8: Insurance Planning

(c) The address of the locations should be declared to the company, at the inception, and Notes
changes advised as and when they occur. However, when locations can be identified
or change is very frequent, the requirements of specifying address of locations is
released, but the number of unspecified locations should not exceed 105 the total
number of locations or 20 locations whichever is lower.
(d) The insured should have a good internal audit and accounting procedure to establish
total amount at risk and locations at a particular time.

(e) The pro-rata condition of average is applied to the limit of sum insured at each
location and also to the total sum insured under the policy.
Declaration Policies

Declaration Policies are useful to businesses, which face frequent fluctuations in stock
quantity or value. Insurance companies can issue these policies subject to the following
conditions:
1. The minimum sum insured is ` 1 crore.
2. Monthly declarations based on the average of the highest value at risk on each day
or highest value on any day of the month is to be submitted by the insured to the
insurer.
3. Reduction in sum insured is not allowed under the policy.

4. The insured can’t claim refund of premium on adjustment based on the declarations
in excess of 50% of the total premiums.
5. The basis of value for declaration shall be the market value prior to the loss or as
otherwise agreed to, between the insurance company and the insured.
Exclusions: Declaration policies can’t be issued in respect of insurance required for a short
period stocks undergoing process and stocks at railway sidings.
Benefits: The premium is limited to the actual amount of risk irrespective of the sum
insured. The liability of the insurer is concurrent under the policy. Provision for adjustment
of premium is an incentive to the insured to effect cover for the maximum amount.
Floater Declaration Policies
These policies combine the features of both floater and declaration policies. All rules
relating to floater policy and declaration policy apply in these kind of policies except:
(i) The minimum premium retention of the insurance company shall be 80% of the
annual premium.
(ii) Minimum sum insured is ` 2 crore
(d) Consequential Loss Policy
Coverage and Suitability: This policy is suitable for business establishments and corporates
for whom business interruption would mean heavy monetary loss in view of huge fixed
costs.

Fire consequential loss policy provides cover for:
(i) Expenses and increased cost of working as a result of business interruption following
a loss covered by the fire policy.

(ii) This cover can be taken for the maximum period of the anticipated interruption in
the event of loss. In addition, the supplier’s and the customer’s premises on which

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