Claim amount payble for restatement policy and market value policy

[Natraj]

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

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[Master]

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.

[Expert]

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

Sum Insured 1000000
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.

[Expert]

And yes there is no benifit or difference in taking insurance on restatement value or market value if its the case of underinsurance.