Hey Guys,
I have one question, can you help me out -
If there is a loss of 100000 and sum insured is 1000000 and reinstantement value is 1200000 and rate of depreciation is 10% in this case what will be the claim amount payble in case of -
a)restatement policy
b) market value policy
It's obvious the market value or you say reistatement value / Sum assured which ever is less.
So in this case the Sum assured id less than Reinstatement value so 100000 is payable less depreciation.
Sum Insured 1000000Quote:
Originally Posted by Natraj
Reinstatement value of the property 1200000
Loss 100000
Answer 1
Since Reinstatement value(RV) is more than the sum insured there is underinsurance and there is no depreciation since it is reinstatement value
therefore,
claim payable=SI/RV * Loss Payable
=(1000000/1200000) * 100000
=83333 is the claim payable for Reinstatement value
Answer 2
Market Value
Here sum insured is 1000000 but reinstatement value is 1200000 again there is underinsurance so 10% should be depreciated from Reinstatement value to arrive market value
1200000 -120000=1080000 is the sum insured
Loss payable is 100000 less 10%depreciation ie 90000
therefore
Claim payable = SI/Market value*loss Payable
=1000000/1080000*90000
=83333 is the claim payable for Market value
If you have any kind of problem regarding general insurance please contact me.
And yes there is no benifit or difference in taking insurance on restatement value or market value if its the case of underinsurance.