Common desire of the insured and the insurer is to agree a way of qualitative insurance. In the following examples are listed only three basic ways of Property Insurance:
- Property insurance in amount of insurance
- Property insurance of the agreed value
- Ensuring the new value
Property insurance in amount of insurance
In this way of the insurance contractor has the right to negotiate the amount of insurance that is exclusively his choice, but it is important to note that the agreed amount of the insurance has an immediate impact of the the calculation of damages and should be equal to the true value. The insured has the right to appeal to the insurer for the consequences arising of agreed amount of insurance. If the amount of insurance is less than the real value comes to under-insurance and the insured cannot achieve full compensation.
The use of under-insurance can be seen from the following example:
- real value of the object: 1.000.000 $
- value at which the owner has secured the object: 800,000 $
You can noticed that the owner has secured its object of the amount that represents 80% of the actual value. Let Suppose that the fire has occurred in a building that has caused damage to 400,000 $. In this case the owner expected compensation of that value, but as a consequence of the difference between the actual value and insured value comes to under-insurance. In this case the insurer applies the rule of the proportion:
- Reimbursement = (insured value x damage) / real value
- Reimbursement = (800.000 х 400.000)/1.000.000 = 320.000
Accordingly, the owner of the object receives compensation for the damage sustained of 320,000 $, which represents 80% of the amount of the the damage.
image credit to cetteiandconnell.com
Property insurance on agreed value
This kind of the insurance can make only legal entities that properly keep records for their properties, and applied to the conclusion of insurance against hazards of fire and other hazards, and some insurance of machines from breaking and some other hazards. As a precondition of this insurance must be included all of the items of the insured which can be subject to insurance according terms of that insurance. For insurance that begin from 01.01 the minimum value of the items for calculation is the carrying revalued purchase value from 31.12 of the previous year. The items insured on agreed value are considered for insured on the real value.
Insurance of a new value
On this way you can ensure buildings (buildings, commercial spaces, apartments, etc..), equipment from hazards that are covered in terms of insurance against fire and other hazards. These special conditions are significant in that the damages on these conditions are reimbursed by the new value and takes into account depreciation. The subject of insurance can be insured on a new value if its real value is not less than 40% of the new value at the time of conclusion of insurance. In this type of insurance is also important to determine the real new value because this type of insurance can be understood as insurance on the amount of insurance in which are used provisions for under-insurance.
image credit to insure.net