Page 398 - IC38 GENERAL INSURANCE

3. Variants of fire policy

Fire policies are generally issued for a period of 12 months. Only for dwellings,
insurance companies offer long term policies, i.e. for a period over 12 months.
In some cases short period policies are also issued, to which the short period
scales are applicable.

4. Market Value or Reinstatement Value Policies

In the event of a loss, the insurer would normally pay the market value [which is
the depreciated value]. Under Reinstatement Value Policy however, the insurers
would pay cost of replacement of the damaged property by new property of the
same kind. The sum insured is required to reflect the new replacement value
and not the market value as under the normal fire policy.

Reinstatement value policies are issued for covering buildings, plant, machinery
and furniture, fixture, fittings. Reinstatement value policies are not issued to
cover stocks, which are covered on market value basis

5. Declaration Policy

Stocks stored in warehouse can be covered by what in termed as a declaration
policy as such stocks are subject to fluctuation in quantity. The sum insured
should be the highest value that is expected to be stored in the godown during
the period of policy. On this value a provisional premium is charged. The
insured has to declare the value of his stocks at agreed intervals, during the
currency of policy. This is adjustable along with the premium at the end of the
policy period.

6. Floater Policies

Another kind of policy is the Floater Policy. These policies may be issued for
stocks of goods which are stored at various specified locations under one sum
insured. Unspecified locations are not covered. The premium rate is the highest
rate applicable to insured‟s stocks at any one location with a loading of 10%.
These are also called fire floater policies as the sum insured „floats‟ over
multiple locations.

Premium rating depends on:

a) The type of occupancy-whether industrial or otherwise.
b) All property located in an industrial complex will be charged one rate

depending on the product(s) made.
c) Facilities outside industrial complexes will be rated depending on the

nature of occupancy at individual location.
d) Storage areas will be rated based on the hazardous nature of goods held.
e) Additional premium is charged to include "Add on" covers.

392