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Session 4 ..Fire Insurance.. Floater and Declaration Policy
Session 4 ..Fire Insurance.. Floater and Declaration Policy
Session 4
A single policy can cover all his stocks in 12 locations under a SINGLE SUM INSURED , which should be the sum total of stocks in all his locations .. He need not provide location wise break up of sum insured This is called a FLOATER POLICY
Floater policyconditions
Complete address of all the locations have to be provided policy Cannot be provided for unspecified locations . This policy can be given mainly for stocks or movable properties .. Not for fixed property . The insured should have sound internal audit and accounting practices, so that the total value at risk for all locations as well as the locations can be established at any point of time . Any addition or deletion of locations should be communicated to insurers immediately
A client has taken a floater policy covering stocks in Mumbai ( Andheri), Delhi( Okhla) , Greater Noida, Gurgaon ( Sector 14) and Chennai ( Whites road ) ..for total sum insured of 100 crores . Policy period 1.4.2012 to 31.3.2013. On 5th of July he shifts his stocks from Gurgaon Sector 14 to Gurgaon Sector 29 he does not intimate to insurer as the location is still in Gurgaon On 10th September there is a fire loss in Gurgaon , Sector -29 !!!
Floater policy..Rating
A floater extra of 10% is charged over and above the base rate . In case the stocks are kept in locations which have different base rates .the highest rate among those would be the base rate . Earthquake rate would be for the highest zone among the locations covered . The highest STFI rate for any of the locations would get charged ..e.g. if stocks are floating among factory and warehouse , STFI rate for warehouse being the higher one, would get applied . No loading for Kutcha construction
W1 Factory
W2
Stocks floating among The three blocks within One compound wall
Based on a provisional sum insured, an initial premium is charged at a rate agreed by both parties . Monthly declarations are provided to the insurer by the insured At the end of the year the premium is adjusted
Reduction in sum insured is not allowed under a declaration policy. Increase in sum insured is allowed on pro-rata basis Stocks covered under Industrial all risk policy cannot be given the Declaration facility .
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Average declaration * Rate == Actual premium to be charged Provisional premium charged actual premium to be charged == refund (subject to max. 50% of total premium)
Such refund computation needs to be done for each of the locations covered
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Without a loss Short period retention of premium on average of declarations received till date of cancellation (including month of cancellation) Subject to min. retention of 50% of provisional premium After a loss :Premium to be retained by the insurer will be SUM of Pro rata premium on average of of declarations received till date of cancellation (including month of cancellation)
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Pro rata premium on amount of loss paid from date of loss till expiry of policy
Subject to minimum of 50% of provisional premium
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Possibility of under insurance being applied twice The provisional sum insured (x) is compared with value at risk as on date of loss (y) Last available declaration immediately before the loss( w) is compared with value which ought to have been declared for that month( z)
Adjusted loss= Loss * x /y * w/z..in case x is less than y and w is less than z
Both the factors of underinsurance may or may not be applied depending on the value
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