The amount or sum insured must represent the cost of reinstatement or the market value of the property destroyed or damaged.
Under-insurance exists when the sum insured is less than the value of the property at the time of loss. When under-insurance exists average will be applied. The effect of the application of average is that the Insured will be the insurer for the under-insured amount.
If at the time of loss or damage, the cost of rebuilding exceeds the sum insured, then the insured will have to bear a ratable proportion of the loss accordingly. Illustration: i) Total Loss If the cost of rebuilding is $500,000 but the sum insured taken up by client for the building is $250,000. When a total loss occured, the company will have to be responsible for Sum Insured $250,000 Value at time of loss $500,000 Loss or damage $500,000 $250,000 (Sum Insured) ------------------------------ X $500,000 (loss) = $250,000 $500,000 (Value at time of loss) The company will be responsible for $250,000 (500,000 - 250,000) ii) Partial Loss Sum Insured $250,000 Value at time of loss $500,000 Loss or damage $100,000 $250,000 (Sum Insured) --------------------------- X $100,000 (loss) = $50,000 $500,000 (Value at time of loss) The company will be responsible for $50,000 (100,000 - 50,000)
The landlord can take up Home Protector for his house but can only cover his building and his own belongings in the house only. There is no insurable interest on his tenant's belongings. The tenant can take up a separate Home Protector to cover his contents instead.
The Policy does not cover loss or damage when the building is left unoccupied in excess of 60 consecutive days.