Sum insured / insured value
The sum insured is the amount agreed in detail between the insurer and the policyholder, which should correspond to the insured value.
The insurer and the company ("policyholder") contractually agree on the sum insured. This amount represents the insured value that "should" correspond to the machinery, equipment, operating facilities. This value is of great importance in a regulation.
Determine insurance value
One of the duties of the appraiser(s) is to determine the insured value. On this depends whether the injured party (policyholder) may have been underinsured.
If the sum insured is lower than the insured value immediately before the occurrence of the insured event, there is underinsurance. In the event of underinsurance, the indemnity shall be reduced in the ratio of the sum insured to the insured value according to the following calculation formula:
Compensation = amount of damage * sum insured / insured value.
Underinsurance occurs when the machinery, equipment and fixtures are incorrectly valued or not valued at all. It can also happen if you simply underreport with the goal of paying lower insurance premiums, or even if you are ill-advised. This then becomes a financial boomerang in the event of a claim at the latest.
Check sum insured => Determine insured value
For settlement by the insurer, it is therefore of decisive importance whether the contractually agreed sum insured was actually applicable in reality at the time of the loss. In practice, contracts are prepared by insurance brokers.
Often the sum insured, which is important for the conclusion of the contract and which of course also influences the premiums to be paid by the policyholder, is estimated or taken from the asset management of the accounting department, i.e. the book values. However, this never meets reality and usually leads to negative surprises in the event of a claim.
Check the values of the machines, equipment and operating facilities in the plant at regular intervals. If necessary, call in experts for an evaluation….