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Note: The basis for determining the value of stocks/property for the purpose of loss
assessment remains the same as for assessing the value at risk. Most of the
Insurance contracts are based on indemnity and surveyor follow the law of
indemnity while assessing any loss. The alternative as provided by the insurers is
to determine the liability on the basis of re-instatement. So the surveyor acts in
accordance with the provision of insurance policy. There are few other arrangements
for example insurance on the basis of fixed values (for imported stocks in trade
etc) which are rarely in practice for which the information is available with the
Insurers for whom it may concern.
Few Insurance terms used above or might be used in this context are being defined
below for ease of reference.
SUBJECT-MATTER
Object/Item/property proposed/declared to the Insurers for Insurance.
INSURABLE INTEREST
The ownership/relationship of the proposer/insured with the subject matter of
insurance. To establish an insurable interest under property insurance following 3
pre-requisites are to be followed.
1. The property proposed to be presented for insurance must exist physically.
2. Such physical object must be the subject matter of insurance.
3. The proposer/insured must have an equitable/legal relationship with that subject
matter of insurance in the manners that at the time of any loss/damage to that
subject matter he is affected adversely and by safety of the subject matter he is
among the beneficiaries legally.
INDEMNITY
Indemnity is the basis of loss assessment/settlement by which the insured/claimant
is placed in the same financial position as he was immediately before the
occurrence of loss. It is in fact depreciated value of that particular property i.e. the
actual cash value or the prevailing market value of the property in the same
condition, at the same place on the date of loss or in some cases the new
replacement value less depreciation. Procedure and practices of application of
different rate of depreciation on different subject matter is followed.
Insured can only be indemnified for actual sustained loss due to physical
damage/loss and not the consequential loss under the law of indemnity. If the
Insured intends to get covered for any consequential loss another form of policy is
available for that particular purpose.
In case of partial loss the insured will be indemnified only to the tune of actual loss
he has sustained.
In all cases the value of salvage and the ownership right under rights of subrogation
are surrendered in favor of insurers.
The choice to repair/restore/replace or reinstate the property is always with the
Insurers. Insured cannot abandon any property at their own unless it is so provided
by the Insurers under the terms of contract.
Where more than one Insurers or policies are on risk against the same property the
loss will be apportioned among all the insurers/policies proportionately so that the
insured may not gain any undue advantage out of insurance policy(s).
In case of under insurance the Insured would be allocated the proportionate benefit
of salvage.
RE-INSTATEMENT
Placing the Insured in the same financial position after the occurrence of loss as he
was immediately before the loss by paying the amount of loss of affected property
as replacement value if new. That is calculated without application of depreciation.
This type of insurance is usually affected for building and machinery.
QAYYUM PERVEZ MALIK
MULTAN
qayyum@qpmalik.com
www.qpmalik.com