Page 8 - Fire Insurance Ebook IC 57

Fire and Consequential Loss Insurance

indemnity is subject to the sum insured and
other terms of the policy. The sum insured can
be fixed on the basis of Reinstatement Value
or Market Value. The term 'Market value'
means, for insurance purposes, the present cost
of construction of similar buildings, after
deducting depreciation based on age, usage,
maintenance etc.

Similarly for plant and machinery, market value
is arrived at by deducting suitable depreciation
for age, usage, wear and tear etc, from the
current replacement costs. In all the cases,
depreciation refers to the actual intrinsic physical
depreciation and not those used for accounting
purposes.

(iv) Subrogation - The principal of subrogation is the
corollary of the principle of indemnity. If the loss
suffered by the insured can be recovered from third

parties who are responsible for the loss, the insured's

rights of recovery are transferred or subrogated to

the insurers , when they indemnify the loss.

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