Multiple choice

In which of the following policies is the principle of indemnity modified?

  1. Fire declaration policy

  2. Fire floating policy

  3. Fire Reinstatement policy

  4. Fire loss of profits policy
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

In fire insurance, the principle of indemnity can be modified in the case of building, machinery and other fixed assets whereby, subject to the sum insured representing the value of similar new property, it can be insured under ‘Reinstatement Value’ clause. In case of reinstatement value policy, the basis of loss settlement is the value of new property without taking any depreciation into account. This type of insurance enables the owner to replace his property without any financial strain on his own resources and is quite commonly taken by industrialists and building owners.

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