CMA Inter || Financial Accounting || Group 1

 Insurance Claim

Insurance For Loss of Stock

• Claim Under General Clause
• Claim Under Average Clause

Claim Under General Clause

• Formula =  Actual Loss of Stock  -  Face Value Of Policy

Claim Under Average clause

• Formula =   Face value of Policy      X    Actual Loss

                        Total Stock in Godown 

Important Notes

1. Amount of claim can not exceeds face value of policy under general/average  clause.
2. Amount of claim can not exceeds the value of total loss.

Insurance For Loss of Profit

• Short Sales 

               Standard Sales - Actual Sales

• Gross Profit For the purpose of Claim (If P&L Shows Net Profit)

         Np + Insure Standing(Fixed) Charges 

(Unless otherwise mention, Standing Charges are always assumed to be insured.)

• Gross Profit Rate

               Gross Profit     X    100

               Sales of Py

• Gross Profit For the purpose of Claim (If P&L Shows Net Loss)

           Insured Standing Charges - Proposnate Net Loss

• Loss Of Profit

                   short Sales X Gp Rate

• Allowed Inc. in Working Expenses

      * It is least of the following:-

1. Inc. in working expenses (Given in question)
2. Inc. in working expenses  X Coverage Req.                                                                                                 Coverage Req.  + Uninsured standing Charges
3. Gp Rate X Sales due to Inc. in working Exp.

#  Coverage Req. =             Adj. Annual Turnover X Gp Rate

#Adj. Annual Turnover  =    Annual Turnover  X Growth Factor  (If Any)

• Saving Expenses         =    Always given in Question ( If any)

• Total Loss Of Profit     =    Step3 + Step4 - Step5

• Claim Under Average Clause

                  FV of  Policy       X     total Loss Of Profit

                 Coverage Req.  

Some Important Terms

Standard Sales  :- It refers to sales affected in the preceding period corresponding to Indemnity period

It must be adjusted with respect to further growth

Actual sales / turnover :- It is the sales affected during indemnity period

Short sales = standard sales - actual sales

Indemnity period = Any period not exceeding 12 months from the date of damage during which business affected due to fire

Sales during preceding / previous = sales during 12 months just preceding year of fire

Annual turnover :- sales during 12 month just preceding date of fire

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