Page 243 - Fire Insurance Ebook IC 57

The Insurance Times

basis of settlement would therefore be the cost of
replacement, and not selling price. The transport cost
is added to the invoice cost but discounts or any
special concessions if any, are deducted.

d. Manufacturers stock - The stocks at the
manufacturer's premises may consist of :
(i) Raw materials - Indemnity is provided by the
landed cost at which such materials are available
at that place and time (i.e the market price) plus
transportation cost.

(ii) Stock in process - The basis of settlement would
be cost of raw materials at the time of loss,
consumption of materials at the time of fire, all direct
costs of processing up to that stage including labour
cost, power, depreciation charges, maintenance
charges on the machineries etc. and indirect costs
like cost of supervisory staffs. Valuation of stock in
progress is a difficult task so the insurer has to use
cost accountancy method to arrive at a proper basis
for settlement.

(iii) Finished goods - The question of valuation of

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