Theory Of Insurance Claim
Advance Financial Accounting
Q. What is Average Clause?
Ans. A firm insurance policy usually include a average clause to dis coverage the under insurance of stock or any assets. The effect of this clause is that if the value of stock or any assets on the date of fire is more than the amount of policy taken. The all value of stock or other assets doesn't become payable to the insured but the insurance company pay the proportion of the loss.
Q. What are the procedure to be followed at the time of computation of loss of profit?
Ans. The following procedure is followed for the calculating of loss of profit:-
i) Compute the short sale by comparing the sale made during the abnormal period in the year of fire with the sale of same period of the last preceding the year of fire.
ii) Calculate the rate of Gross Profit of the financial year preceding the year of fire.
iii) Calculate the loss of profit on short sale by applying the Gross Profit calculated in step (ii)
iv) A increase (working cost) or cost of working is increased to mitigate the effect of loss on A/C of short sale to the loss of profit calculated in step (iii)
v) Deduct the amount of expenses saved as a result of fire from the total claim in the step (iv)
vi) Gross claim is calculated in step (v) is subject to average clause as follows:-
(Gross Claim X Policy Value) / Gross Profit on 12 month sale adjusted immediately preceding the date of fire
Q. What are the various point which are consider for the estimation of stock in hand on the date of fire?
Ans. Various point to be considered are as follows:
i) Find out percentage of Gross Profit on sale.
ii) Prepare memorandum trading A/C up to the date of fire on the basic of opening stock, purchase and sale made up to the date of fire.
iii) Deduct the value of stock salvage [if any] form the value of stock ascertain to step (ii).
Q. What is Insured Standing Charge?
Ans. Standing charges are refers to those fixed expenses which are to be incurred irrespective of the reduction in turnover while taking out loss of profit policy the standing charge which is mentioned in the policy is called insured standing charge.
Q. What is Salvage Value?
Ans. Salvage value means stock which are saved from fire and it should be deducted from the stock on the date of fire to find out value of stock destroyed by fire.
Q. What is Indemnity Period?
Ans. It is actually the period from the date of hazard up to the date of organisation began normal functioning subject to the number of days mentioned in the policy as a period of indemnity.
Q. What is Standard Turnover?
Ans. It is the turnover during the period of 12 months immediately preceding the date of hazard which correspond with the indemnity period.
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Q. What are the procedure to be followed at the time of computation of loss of profit?
Ans. The following procedure is followed for the calculating of loss of profit:-
i) Compute the short sale by comparing the sale made during the abnormal period in the year of fire with the sale of same period of the last preceding the year of fire.
ii) Calculate the rate of Gross Profit of the financial year preceding the year of fire.
iii) Calculate the loss of profit on short sale by applying the Gross Profit calculated in step (ii)
iv) A increase (working cost) or cost of working is increased to mitigate the effect of loss on A/C of short sale to the loss of profit calculated in step (iii)
v) Deduct the amount of expenses saved as a result of fire from the total claim in the step (iv)
vi) Gross claim is calculated in step (v) is subject to average clause as follows:-
(Gross Claim X Policy Value) / Gross Profit on 12 month sale adjusted immediately preceding the date of fire
Q. What are the various point which are consider for the estimation of stock in hand on the date of fire?
Ans. Various point to be considered are as follows:
i) Find out percentage of Gross Profit on sale.
ii) Prepare memorandum trading A/C up to the date of fire on the basic of opening stock, purchase and sale made up to the date of fire.
iii) Deduct the value of stock salvage [if any] form the value of stock ascertain to step (ii).
Q. What is Insured Standing Charge?
Ans. Standing charges are refers to those fixed expenses which are to be incurred irrespective of the reduction in turnover while taking out loss of profit policy the standing charge which is mentioned in the policy is called insured standing charge.
Q. What is Salvage Value?
Ans. Salvage value means stock which are saved from fire and it should be deducted from the stock on the date of fire to find out value of stock destroyed by fire.
Q. What is Indemnity Period?
Ans. It is actually the period from the date of hazard up to the date of organisation began normal functioning subject to the number of days mentioned in the policy as a period of indemnity.
Q. What is Standard Turnover?
Ans. It is the turnover during the period of 12 months immediately preceding the date of hazard which correspond with the indemnity period.
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