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.
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2) Loss of Profit Policy (Consequential loss policy)
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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
7) Sum Insurable = Adjusted Annual turnover x Adjusted G.P. ratio
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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