In this policy the indemnity is a fixed amount agreed upon at the time of signing the contract.

The insurance company pays that amount regardless of the actual loss due to fire. The insured is benefited when the market value of the property declines , but suffer loss when the market value appreciates. It is also known as Value insured policy. The valued insurance policy is usually offered for such items like jewellery, furs, or paintings, which value is difficult to estimate once they are damaged or destroyed by fire.

The policy indemnifies the cost of replacement of machinery to a condition equal to but not better or more extensive than its condition when new. Hence this policy is new for old. This policy can be issued for Building, Plant and Machinery, Furniture Fixture & Fittings only. Any technical improvements will go to the account of the insured. Reinstatement must be carried out by the insured in order to obtain the benefits of the special basis of settlement. The work of reinstatement must be completed within 12 months from the date of loss, failing which the claim will be settled on market value basis. The insured also needs to pay higher rate of premium.

It is taken out for those goods which are frequently changing in a warehouse. This policy can be taken on those goods which are lying on different localities or godowns. Since quantity of goods lying in the warehouse or at different places fluctuate from time to time, it becomes difficult for the owner to take a specific policy. Floating policies are suitable to those traders or products whose rawmaterials or merchandise are lying at different localities or godowns. For example:-Some of the goods of other trader are kept in one godown, and few kept in another godown, some kept in the railway godown or some at the sea port open. To cover the risk of goods lying at different places under one policy.

Many insured may have stocks which frequently fluctuate in value. To take care of such fluctuation in quantity/ value , a declaration policy is issued. The sum insured will be the maximum possible value at any point of time during the policy period. The minimum sum insured will be Rs. 1 cr. in one or more locations and shall not be less than Rs.25 lacs in atleast one of these locations. Monthly declarations based on a) The average of the values at risk on each day of the month or b) The highest value at risk during the month. must be submitted by the insured before the end of the succeeding month.

On maturity of the policy, average value of the stock is taken out and on average value the final premium money is find out. If it is less then initial charged premium then insurer will return excess amount. If declaration is not received for a particular month, the sum insured will be treated as the declaration for the month. Reduction in sum insured is not allowed. Increase in sum insured can be done with prior agreement. Basis of value for declaration will be the market value. Declaration policy cannot be issued for stock in process/ retail stores /short period insurance.

REINSTATEMENT VALUE POLICY

for Buildings, Plant and Machinery etc
claim Settlement Depreciation is not deducted from new Replacement value. -- Physical Reinstatement is required for this mode of settlement. Otherwise Market value mode is adopted. -- Within 6 months intention to reinstate & within 12 months actual reinstatement to be carried out. -- No Extra premium, SI= RIV value -- Not applicable for stocks -- For Under Insurance, RIV on completion will be compared with SI on Loss Date.

-- In

It is issued for existing stock. In this policy premium rate shall be adjusted according to increase or decrease in the value of stock, this change will be notified to the insurer by the insured. In case of loss by fire, the amount notified by the insured at the maturity of the policy is taken as final and indemnified upto that limit. It is a contract limited to merchandise or stock in trade other than farming stock.

A specific policy is a type of policy in which the property is insured for a specific sum irrespective of its value. If there is loss, the stated amount will have to be paid to the policyholder. But the actual value of the subject matter is not considered in this respect. For example, if a property is insured for Rs. 10000 though its actual value is Rs. 20000. In the event of loss to property, not more than Rs. 10000 can be recovered.

Where a property is insured for a sum which is less than its value, the policy contain a clause that the insurer shall not be liable to pay the full loss but only that proportion of the loss which the amount insured for, bears to the full value of the property.

Amount of Indemnity = Policy money x Actual amount of loss Market value of the property insured

For example A value of the property is Rs.1,00,000. It is

insured for Rs.60,000 and the amount of loss is Rs.60,000. The insurance company will not pay Rs.60,000 to the policyholder but will pay Rs.36,000 .

The insurance is affected on the maximum value of stock remains throughout the year and accordingly premium charged. In the case of no indemnity, one third of the premium paid is return to the insured at the end of the year. It can be treated as a discount in consideration of variations in value of goods.