First Loss Insurance Policy
There is a possibility that the proposer may think that due to the nature of the content there is a very lesser probability of the loss of stocks ( 100% ) under Burglary Insurance hence may request the Insurance Company for a percent of total stocks so declared.
In Insurance parlance, such insurances are called “PARTIAL VALUE” or “FIRST LOSS” Insurance. Here insurer is willing to accept deliberate under insurance with a sum insured based on the insured’s own estimate of the maximum possible loss.
The declared value clause in the “First Loss” insurance policies introduces a declared value into the wording, but this declared value is not the sum insured. The sum insured is the insured’s estimate of the maximum loss likely to occur (which is selected percentage of full value) and this sum insured is the limit of the insurer’s liability.
The declared value should be the total value of the insured property and it is in this figure that the premium is calculated. However, the premium is charged as percentage of total stocks so declared based on selected percentage.
Condition of Partial Average, as under, will apply :-
It is hereby declared and agreed that this Policy is issued as the First Loss Insurance up to _______% of the insured’s total stocks (100%) as limits in the schedule attached to and forming part of the policy.
It is further declared and agreed that in the event of the total value of stocks at risk at the time of loss be greater than the total value declared for purposes of this insurance and incorporated in the schedule, the insured shall be considered as being his own insurer, for the difference, and shall bear a rate able share of the loss accordingly.
First Loss Policy may be issued only under the following circumstances and conditions: -Acceptances should only be considered in the case of the large warehouse and stores where the value of stock is considerable and where the stocks involved are of substantial and bulky nature, rendering total loss a remote possibility.
- For item wise sum insured it should not be less than R. 5 lacs.
- Such a policy may be considered only where the total value of stocks to be insure, say Rs.25 lacs.
- No First Loss Policy may be issued for less than 25% of the total value of the property to be insured.
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