Sum Insured types | Replacement value insurance

 

                          The Sum Insured type3

                                          

Sum-Insured-type

Replacement value insurance;

                                                                  As we have already mentioned, it consists of guaranteeing the replacement of damaged machinery or, in general, damaged goods, with others of identical functionality and identical state of preservation and performance. This coverage is applicable when for reasons technology would not be adequate real value assurance, due to the objective difficulty of repairing the damaged property.

 

New value insurance;                 

                                    Finally, another possibility of coverage consists of replacing the damaged goods with new ones, with the same functionalities as the previous ones. This modality is appropriate when it is agreed in the contract.

                     In damage, insurance contracted at real value, the assets must be valued, for insurance purposes, at the value that they are estimated to have at the time of the loss.

                      Under this premise, the properties should be valued according to the price of the building, therefore deducting the lot, according to the value of a new construction but deducting the difference between the values from new to old, without exceeding the sale value of the building.

                Furniture, machinery, and, in general, all contents should be valued according to their price, taking into account the use that has been made of them. Goods and goods in the manufacturing process must be valued at the market price at the time prior to the claim, or by computing the raw materials and the value added by the transformation process that has been applied.

 

Part-value insurance;           

                                            When the occurrence of damage to the entire property is impossible, the insurance is contracted for a lower insured capital, equivalent to the maximum loss that can occur.

                        This occurs, for example, in department store theft insurance, in which the amounts stolen cannot reach the totality of the establishment's inventory. In the event of underinsurance, the proportional rule applies.

First risk insurance; 

First-risk-insurance

                                               

                                                    In this case, there is no direct relationship between the value of the thing and the sum insured, but an arbitrarily determined amount is insured in the event of a claim. This modality is usual in the insurance of the theft of metallic cash or in the guarantee of damages produced in the houses to carry out the theft.

 

OVER INSURANCE AND UNDERINSURANCE. THE PROPORTIONAL RULE;       

                                                 With the exception of first-risk insurance, defined in the previous section, in the insurance on things, which governs the principle of compensation that prevents enrichment due to the loss, the insured capital can be equal, lower or higher than the real value of the insured assets which determines differences between the real value and the insured value with the corresponding need for correction in the event of a claim. In the event that the insured capital is lower than the real value, we find the underinsurance and in the case that it is higher, with the over insurance, as we saw in the previous section.

                               When there is underinsurance, that is, the capital that appears in the policy and with which the premiums have been calculated is less than the real value, in the event of a claim the so-called proportional rule is applied, which consists in that the compensation going to be paid by the insurer in the event of a claim will be that which corresponds according to the proportion that exists between the insured capital and the real value. Thus, for example, if the insured capital is equal to 70% of the real value, any loss that occurs will determine a Compensation by the insurer equivalent to 70% of the damage that has occurred.

         When the loss is total - the burning of all property insured, theft of the same, the sinking of the ship without rescue, etc. - the compensation will be equal to the insured capital. In the event of claims or partial losses, the company will compensate the damage in the same proportion that exists between the insured capital and the real value, with the rest of the claim being the responsibility of the insured.

                    The so-called "equity rule" is analogous to the proportional rule, Although in this case the compensation is reduced by the insurer in the proportion in which the premium paid by the policyholder is less than that which should have been applied if the true, more serious circumstances of the risk had been known.

 

SELF INSURANCE. THE FRANCHISE;           

                                                                Self-insurance consists of the assumption, by who is exposed to the Risk, of all or part of the consequences of its occurrence. Self-insurance can be voluntary or involuntary. The volunteer takes place when the person exposed to the risk decides not to take out the insurance in its entirety, covering himself with preventive measures. The underinsurance known to the policyholder will also be voluntary, which in the event of a claim will determine a distribution of its cost between the insurer and that one.

              Another form of voluntary self-insurance is the franchise, which consists of an amount that in all claims will be borne by the policyholder. The excess can be an absolute or relative sum (for example a percentage), which the insurance company will deduct from each claim.

               In this case, we are facing a new definition of risk that is you want to insure. Thus, you do not want to insure the theft, but only the theft that has certain consequences in terms of the number of losses. This will occur in a lower number of cases, that is, the probability of occurrence will be lower and, in addition, the cost of each claim for the insurer will be lower, for which the reason the applicable premiums for coverage of the risk with the franchise will be lower than the of risk without it.

                        Forced self-insurance occurs when there is underinsurance Inadvertent by the policyholder and, a posterior, a compensation less than the damage caused by the loss is derived from him.