UNDER INSURANCE

[AJIT SAHU]

Friends,

Recently many insurers are insisting on applying Under Insurance in case of TOTAL LOSS claims also. Whereas I do not agree with this.

 

Kindly give your opinion/comment.

I will specifically request Mr. Shukla to comment.

 

Regards

 Ajit Kumar Sahu

HI-62; Harmu Housing Colony

Harmu, Ranchi

Jharkhand 834 012

Phone:0651-2341764

Cell    :098351 64636

           094307 88048 

[mohan israni]

Dear Mr.Ajit Kumar Sahu,

If you are referring to Engg. and Fire policies, the underinsurance, in the case of total loss claims, will be applicable only if the SI is less than the market value i.e. if the SI works out to be less after application of proper depreciation on the damaged equipment. Good Wishes                                               Mohan Israni 

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[Piyush Siinghal]

In MBD claims both concept apply.

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B/Rgds

Piyush Siinghal
0-9811047785
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www.salvagemanagers.com

[P.C.Shukla]

Dear Ajit,

 

Your query is very strange in the sense that ‘Total Loss” has nothing to do with under insurance!!. In fact the impact of UI in total loss claim stands NIL, when salvage value (value after loss) become zero.  I am giving you two case studies to clear this issue:-

 

CASE 1

 

Stock of cloth is insured for 2 lacs. Due to fire stock worth 2.5 lacs totally perished in fire i.e no salvage value. The liability in this case will automatically stand to max. Liability i.e SI of  2 lacs. This can be illustrated by the following formula:-

 

Loss( Value before fire-Value after fire)XSI          = ( 2.5-0)x2 = 2 lacs

Value at risk                                                                   2.5

 

CASE 2

 

Same as above but the salvage value of burnt cloth though Total loss can fetch Rs.1000.00. The loss illustration is as below:-

 

 

Loss( Value before fire-Value after fire)xSI     =  (2.5-0.01)x2 = 1.992

Value at risk                                                                2.5

 

 

 

You can see from above illustration that by mere salvage value of 1000.00 there is a impact on the liability on account of UI.

 

So it not important whether UI is applicable on total loss or not but the important point is your understanding of term Total Loss. In true sense TOTAL LOSS means TOTAL LOSS i.e NIL value after loss.

 

Hope I am able to clear your query.

 

Regards,

P.C. Shukla| Surveyors & Loss Adjusters|Surveyors India

| 117/H-1/125| Pandu Nagar| Kanpur| Uttar Pradesh - 208005| INDIA

| Tel: +91-512-2216416 | Tel/Fax: +91-512-2231409| Mobile: +91 9415044156