Page 64 - Fire Insurance Ebook IC 57

Fire and Consequential Loss Insurance

Q6. Discuss the process of reinstatement value
policies.

Ans. This is a policy issued on the fire policy form with a
Reinstatement Value Memorandum. The salient features
are:
(i) This policy is issued on buildings, plant, machinery,
furniture, fixture and fittings , but not on stocks.

(ii) This policy differs from the fire policy on the basis
of the market value of the insured property
immediately before the fire. This value is arrived at
strictly according to the principle of indemnity, i.e by
taking into account depreciation, wear and tear etc.

(iii) Under the reinstatement value policy, the payment
to be made is the cost of reinstatement of the
building or the cost of replacement of the machinery
to a condition equal to its condition when new.

(iv) Thus, under this policy it is possible to recover the
cost of replacement of the damaged property by
new property of the same kind not the depreciated
value. If the property is damaged, then the cost of
making good that damage is paid.

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