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Questions and Answers
What does the market value of raw materials represent?
What does the market value of raw materials represent?
- The cost to purchase raw materials in the market to replace damaged ones. (correct)
- The total expenses incurred during processing.
- The selling price of finished goods.
- The sum of overhead expenses related to production.
Which of the following statements is true regarding the sum insured?
Which of the following statements is true regarding the sum insured?
- It includes the profit margin on selling the goods.
- It must be determined by the insurance company.
- It serves as the maximum limit of liability under the policy. (correct)
- It can exceed the actual value of the property insured.
What happens to a claim amount in the case of under-insurance?
What happens to a claim amount in the case of under-insurance?
- The claim amount is increased by a fixed percentage.
- The claim amount is paid in full without changes.
- The claim amount is reduced proportionately by applying pro-rata average. (correct)
- The claim is completely denied.
What is the principle of subrogation related to?
What is the principle of subrogation related to?
Which type of goods includes all overhead expenses incurred until it reaches the finished goods stage?
Which type of goods includes all overhead expenses incurred until it reaches the finished goods stage?
What type of damage caused by aircraft is explicitly excluded from the term 'aircraft damage'?
What type of damage caused by aircraft is explicitly excluded from the term 'aircraft damage'?
Which of the following scenarios would NOT be covered under riot, strike, malicious and terrorism damage?
Which of the following scenarios would NOT be covered under riot, strike, malicious and terrorism damage?
What type of government action is explicitly excluded from riot-related insurance coverage?
What type of government action is explicitly excluded from riot-related insurance coverage?
How does the terrorism damage exclusion warranty affect insurance claims?
How does the terrorism damage exclusion warranty affect insurance claims?
Which of the following is considered external violent means under the riot and strike damage policy?
Which of the following is considered external violent means under the riot and strike damage policy?
What happens if the amount insured is less than the full value?
What happens if the amount insured is less than the full value?
In the event of a loss covered by multiple policies, how is liability determined?
In the event of a loss covered by multiple policies, how is liability determined?
What does the subrogation condition involve?
What does the subrogation condition involve?
Which statement is true about the arbitration condition?
Which statement is true about the arbitration condition?
What is the purpose of the usual contribution condition?
What is the purpose of the usual contribution condition?
What is the principle of subrogation in fire insurance?
What is the principle of subrogation in fire insurance?
What determines the legal validity of insurance contracts?
What determines the legal validity of insurance contracts?
How can the sum insured in a fire insurance contract be fixed?
How can the sum insured in a fire insurance contract be fixed?
According to the pro-rata average condition, how is the reimbursement calculated?
According to the pro-rata average condition, how is the reimbursement calculated?
In terms of liability in fire insurance, what role does indemnity play?
In terms of liability in fire insurance, what role does indemnity play?
Which item is typically excluded from coverage without special terms or conditions?
Which item is typically excluded from coverage without special terms or conditions?
What type of loss is specifically excluded under the Electrical Risks exclusion clause?
What type of loss is specifically excluded under the Electrical Risks exclusion clause?
Which property can be covered subject to special terms if specifically declared?
Which property can be covered subject to special terms if specifically declared?
Which risk is considered under 'add-on' covers related to stocks in cold storage?
Which risk is considered under 'add-on' covers related to stocks in cold storage?
What scenario could potentially allow coverage for losses resulting from electrical issues?
What scenario could potentially allow coverage for losses resulting from electrical issues?
Study Notes
Stocks and Insurance Basics
- Raw Material Value: Market value reflects the cost for replacing damaged raw materials.
- Semi-Finished Goods Value: Includes cost of raw materials plus processing expenses up to the semi-finished stage.
- Finished Goods Value: Comprises the cost of raw materials and all overhead costs incurred until goods reach completion.
- Selling Price Exclusion: Selling price that includes profit cannot be considered for sum insured.
Sum Insured Principles
- Determination: Sum insured fixed by the insured, represents the maximum liability under a policy.
- Premium Calculation: It reflects the amount applied to calculate the premium.
- Actual Value Representation: Must accurately represent the property insured to avoid under or over-insurance.
- Pro-rata Average: Under-insurance leads to claims being proportionately reduced based on the actual insured value.
Subrogation
- Definition: Rights of recovery from third parties are transferred to insurers post indemnification of the insured loss.
Damage Exclusions
- Aircraft Damage: Excludes damage caused by pressure waves from aircraft.
- Riot and Malicious Damage: Covers visible loss due to external violence, excluding some interruptions and unlawful occupancies.
- Terrorism Exclusion: Loss related to acts of terrorism is excluded unless expressly stated in the policy.
- Specific Items Exclusion: Loss of certain high-value items (e.g., bullion, works of art) beyond specified limits is typically excluded.
Additional Deterioration Coverage
- Cold Storage Risks: Coverage may apply for deterioration of stocks due to power failure if linked to a covered peril.
- Electrical Risks: Damage from electrical failures (e.g., short circuits) is excluded but fire damage resulting from these issues may be covered.
Insurance Valuation Conditions
- Common Premium Fund: Adequate premium payment requires the sum insured to match the full value of the insured property.
- Rateable Proportion: If multiple policies cover the same property, claims are paid proportionally based on the sum insured across policies.
Arbitration Clause
- Disputes Resolution: Specifies process for arbitration concerning payment disputes, requiring a sole arbitrator appointed by the parties.
Practice Questions Insights
- Sum Insured Calculation: Can be based on asset cost, reinstatement value, nominal value, or rateable value.
- Insurable Interest Importance: Necessitates a legal right to insure, reflecting financial relationship with the insured property.
- Pro-rata Application: Illustrates how claim payouts are calculated based on coverage relevance and proportionate values.
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Description
This quiz explores the concepts of market value related to stocks and various stages of goods including raw materials, semi-finished, and finished products. Understand how to calculate market value and its implications in the insurance context. Perfect for students studying finance or supply chain management.
