# Insurance Claim

INSURANCE CLAIMS

B) Calculation of Insurance claim for loss due to fire:

1) Loss of Stock Policy

2) Loss of Profit Policy (Consequential loss policy)

C) Average Clause

A) Types of Insurance

1) Life Assurance

2) General Insurance

a) Fire Insurance

i) Loss of Stock ii) Loss of Profit

iii) Loss of Capital Assets  (for e.g. Building, Furniture, etc)

b) Marine Insurance

c) Miscellaneous Insurance

i) Health Insurance (Mediclaim)

ii) Motor Vehicle Insurance iii) etc

B) Calculation of Insurance claim for loss due to fire:

1) Loss of Stock Policy

Step 1: Prepare Trading A/c (from beginning of the year till the date of fire) to find Closing Stock on the DOF as b.f.

Note: If either G.P.ratio or Opening stock is not given, then prepare Trading A/c of last year also as working note.

 Particulars Rs. Estimated value of stock on the date of fire             (W.N.‐1) Less: Value of stock salvaged                                       (given) Estimated value of stock lost due to fire Add:           Fire fighting expenses Gross Claim     Net Claim                      = Gross Claim    x         Sum Insured (Average clause)                                                      Sum Insurable xxx (xxx) xxx xxx xxx xxx

Step 2: Prepare Statement of Claim as below: Statement of Claim

2) Loss of Profit Policy (Consequential loss policy)

 Particulars Rs. Gross Profit lost during claim period                                                                  (W.N.‐5) Add: Claim for the increased cost of working (Additional Expenses)              (W.N.‐8) Less: Saving in insured standing charges                                                           (given) Gross Claim   Net Claim                      = Gross Claim    x         Sum Insured (Average clause)                                                      Sum Insurable (W.N.-7) xxx xxx (xxx) xxx xxx

Statement of Claim

Working Notes:

1) Adjusted G.P. ratio  Net Profit + Insured standing charges  x  100         ± Trend

Turnover of last accounting year

2) Adjusted Standard turnover =   Turnover for the corresponding claim period in the preceding year            ± Trend

3) Claim period = Indemnity period (max. 12 months ) or dislocation period, whichever is less

4) Short Sales (Turnover lost in claim period) = Adjusted Standard turnover ‐ Actual turnover during the claim period

5) Gross Profit lost during claim period = Short Sales (Turnover lost in claim period)  x Adjusted G.P. ratio

6) Adjusted Annual turnover =      Turnover during 12 months immediately preceding the date of fire           ± Trend

8) Claim for the increased cost of working =   Increase in cost of working  x     Sum Insurable

(Additional Expenses)  [least of two]                (Additional Expenses)             Sum Insurable + Uninsured standing charges

Or

Reduction in turnover avoided due to increased cost of working x Adjd.G.P.ratio

C) Average Clause

This clause is a clause of Fire Insurance Policy. Under Average Clause, if the amount of policy is less than the value of the subject matter of the insured, the insurer will be liable for only that portion of loss which the policy amount bears in respect of the subject matter. The fire insurance policies often include an average clause for discouraging the under insurance.

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