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S&A Knowledge Series - General Insurance Advisory

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Highlighting our varied reach of business operations we share with you some key points which should be kept in mind while taking a general insurance policy. These would not only help you lower your premium but would also help in having ease in the claim in case of any adversary.

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S&A Knowledge Series - General Insurance Advisory

  1. 1. Page | 1 ` Important Guidelines for your general Insurance Policies <<<<<< S&A Knowledge Series Prepared by Ashim Kr Srivastava Partner (Insurance and Risk) www.sethspro.com info@sethspro.com New Delhi | Lucknow | Coimbatore
  2. 2. Page | 2 Below are some key pointers which should be taken care of while taking an insurance policy or actions in the current situation. 1. LOCATION OF BUSINESS a. Name and address of the firm / company should be printed on the face of the policy. In the normal circumstances, address mentioned in the policy is place of working/stocking but many times it has been seen that place of working, stocking are separate locations, thus all those locations need to be included in the policy to have coverage under the policy for all business places. In case there are 3 or 4 shops in a row then all the shops should be included in the policy with complex name, road- street name etc. If there is any change in the location of risk due to shifting or having new place kindly ask the Insurance company to suitably amend and there should a proper endorsement. b. Location of risks column should be seen minutely in the policy and if location of stock / business place is missing, same needs to be included in the policy. Basement (if any) to be specifically included in policy (underwriter normally puts word “Basement warranty” meaning thereby no claim is payable for basement stock loss). 2. SUM INSURED a. Stock to be valued and insured at cost or market value whichever is less (inclusive of GST). If someone has stock of more than Rs. 2 crores and there is regular fluctuation of stock in that case it is advisable to take full cover. b. In case there is regular fluctuation in stock levels on a month to month basis then declaration policy should be taken to save the premium. (One has to declare the stock on monthly basis and premium will be adjusted at the end of the policy
  3. 3. Page | 3 period, insured will be refunded extra premium paid subject to minimum retention of 50%). c. For business like Laundry, repairing shop, Job work or contract manufacturer, kindly mention the word “stock / goods held in trust” in the policy to cover such stock. This can be done in the other business also where there is possibility of having customer’s good in the premises for which insured is responsible. (Like mobile & computer shops). d. With regard to Insurance of building, factory & plant and machinery there are two ways. i. (Value) first market value which is present day market value (say after depreciation) ii. RIV (Re Instatement value) means old verses new. Under this formula one has to insure the risk at higher value in order to get higher/ latest value claim. RIV clause needs to be there in policy, this is normally issued to large/ high risk insurance with proper pre inspection by risk analyst. e. For trading business stock, sometime specific name of covered items is given. It is better to avoid this because many a times items not named in the policy are not covered. Better to include words like “Stock pertaining to insured trade including packing material”. f. For manufacturing units, it is desired to have words like “All types of raw material, consumables, inputs, semi-finished/stock under process, finished stock, by product and packing material” as part of stock coverage. 3. OTHER IMPORTANT POINTS a. Insured should include a specific clause “Designation of property clause” this will ensure that in case of loss, description/ classification of items stated in the books of accounts will be read and not what is written in the policy. For example, there is always a confusion for items like plant & machinery, office equipment, electrical fittings, computer, hardware. Insurance company normally do not allow claim if the specific items are not covered. In case if the insured includes “Designation of property clause” then classification of assets as per books of accounts shall be read and claim will be dealt accordingly. b. For building/ civil work word “Plinth and foundation” to be included in the clauses with earthquake coverage (Normally Insurance company issue policy for super structure only thus avoiding loss in case of earthquake.)
  4. 4. Page | 4 c. Ensure your security items like alarm, firefighting equipment, CCTV and other security measured as stated in the policy or in proposal form are in operating condition. During claim processing surveyor look at such things. d. Occupancy of premises : This is very important due to Corona-virus issue where shops / factory/ godown / place of working / office ( other essential commodities/ services ) will remain shut for more than 30 days and Insurance company does not cover loses which remains non occupied premises, thus there is urgent need to write/ intimate to the Insurance Company that you want to cover the risk during lock down period and if any extra premium required to be paid then you should be ready to pay for this extended cover. e. Professional Indemnity policy for Doctors and Hospitals, CA, Advocate, Product liability risk, Event management risk, Jewellers block policy, LPG Distributors, Petrol pump, Hotel & Restaurants, Money Insurance, Fidelity Insurance etc to be taken after consulting risk advisor / Consultant. f. For large risk & new setup it is better to take policy in consultation of risk advisor to have full coverage of risk with lesser premium burden. Try to avoid Bank imposed policy since they are unaware of Insurance risk which later on may create problem / or engage Risk Consultant to have dialogue with Banker before taking any policy. g. If the firm / Company is insured through their Banker, do ask for the policy copy and review the entire policy in the light of above submission. Take Insurance advisors help wherever necessary to avoid any claim related issue later on. h. Prepare a dairy for Insurance risk including your Factory, Office, Godown, Shop, Stock, Home, Car/Vehicle, Transit insurance, Medical Insurance etc for regular renewal and also see the above-mentioned point to have proper and adequate coverage. Seth & Associates was established in 1975 and since then it has been providing unparalleled value addition to its client. We are a firm with diverse and rich exposure in various fields. All our partners are full time active working partners looking into specific sector domains such as Corporate Law, Direct Tax, Indirect Taxes, Raising Capital (Bank and Equity), Business Advisory solutions, Forensic and Information Technology audit and many other core sectors relevant to overall growth of the clients. The information herein contained is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endevour to provide accurate and timely information, there can be no gurantee that such information is very accurate and considers the latest amendment in laws which are very frequent. The above is purely for academic reading and general awareness of the law. No one should act on this information without appropriate professional guidance which requires a thorough exemation of a particular situation. This content is owned by Seth & Associates, Chartered Accountants and is not be reproduced without our explicit permission. www.sethspro.com | info@sethspro.com New Delhi | Lucknow | Coimbatore