Chapter 8 Chapter 8

Property InsuranceProperty Insurance

ContentContent

1. Meaning of property insurance1. Meaning of property insurance

2. Sum insured in property 2. Sum insured in property insuranceinsurance

3. The calculation of value in 3. The calculation of value in property insuranceproperty insurance

4. Reinstatement4. Reinstatement

5. Provision of property insurance5. Provision of property insurance

1. Meaning of property insurance1. Meaning of property insurance

The insured pays the premium to The insured pays the premium to the insurance company, the insurer the insurance company, the insurer undertakes to indemnify the undertakes to indemnify the insured against any financial loss insured against any financial loss he may directly sustain as a result he may directly sustain as a result of the happening of an insured of the happening of an insured event to the subject matter of the event to the subject matter of the insurance.insurance.

2. Sum insured in property insurance2. Sum insured in property insurance

If the insurer receives a premium commensurate If the insurer receives a premium commensurate with the risk, the sum insured represents its full with the risk, the sum insured represents its full value at the time of issuing policy. value at the time of issuing policy.

￥￥ 240,000240,000

If the sum insured is less than the full value of the If the sum insured is less than the full value of the property, it is underinsurance. property, it is underinsurance.

If the sum insured is If the sum insured is ￥￥ 800,000, the insurance value 800,000, the insurance value of the property is of the property is ￥￥ 1,000,000, it is under 1,000,000, it is under insurance. If the partial loss is insurance. If the partial loss is ￥￥ 300,000, how 300,000, how much is the insured entitled to get the indemnity?much is the insured entitled to get the indemnity?

3. The calculation of value in property insurance3. The calculation of value in property insurance

3.1 Buildings3.1 Buildings

The normal basis for buildings is the cost The normal basis for buildings is the cost

of repair or reinstatementof repair or reinstatement

3.2 Machinery3.2 Machinery

When repair of machinery is possible, the When repair of machinery is possible, the

basis of indemnity is the cost of restoring it to basis of indemnity is the cost of restoring it to

its previous condition. If total loss, indemnity its previous condition. If total loss, indemnity

is the cost of replacement less wear and tear. is the cost of replacement less wear and tear.

3.3. Retainer's stock3.3. Retainer's stock

For retainer's stock, the indemnity is generally For retainer's stock, the indemnity is generally based on the wholesale price paid by the based on the wholesale price paid by the insured, not the selling price, since the latter insured, not the selling price, since the latter includes a profit. The cost price can be includes a profit. The cost price can be ascertained from the wholesalers' invoices. ascertained from the wholesalers' invoices. Discounts should be deducted, since the Discounts should be deducted, since the insured will obtain similar discounts when the insured will obtain similar discounts when the goods are replaced by new stock. goods are replaced by new stock.

3.4 Manufacture's stock3.4 Manufacture's stock

In the case of goods manufactured but In the case of goods manufactured but unsold at the time of the fire or other insured unsold at the time of the fire or other insured damage, indemnity is generally based on the damage, indemnity is generally based on the cost of production which includes the costs of cost of production which includes the costs of raw materials, labor, factory overheads and raw materials, labor, factory overheads and administrative costs but excludes profit.administrative costs but excludes profit.

However, if the total exceeds the market However, if the total exceeds the market value of the goods (that is, the price at which value of the goods (that is, the price at which they can be ‘bought in' elsewhere), then the they can be ‘bought in' elsewhere), then the market value is the true indemnity.market value is the true indemnity.

Section 4 ReinstatementSection 4 Reinstatement

Reinstatement means the restoration of the Reinstatement means the restoration of the property insured to the condition in which it was property insured to the condition in which it was immediately before the fire. immediately before the fire.

In the event of a total loss, it is made by rebuilding In the event of a total loss, it is made by rebuilding the premises or replacing the goods by similar the premises or replacing the goods by similar goods. When there is a partial loss, reinstatement goods. When there is a partial loss, reinstatement is made by executing the necessary repairs. is made by executing the necessary repairs.

Reinstatement may be made by the insurers under Reinstatement may be made by the insurers under the terms of the policy, by the insurers under the terms of the policy, by the insurers under statute and by the insured under contract.statute and by the insured under contract.

5. Provision of property insurance5. Provision of property insurance

The following articles are not coveredThe following articles are not covered

1. Guns, ammunition or explosives; 1. Guns, ammunition or explosives;

2. Banknotes, securities, bills, documents, files, 2. Banknotes, securities, bills, documents, files, account books or drawings;account books or drawings;

3. Animals, plants and agricultural crops; 3. Animals, plants and agricultural crops;

4. Mobile phones, portable computers,4. Mobile phones, portable computers,

removable photograph apparatus or otherremovable photograph apparatus or other

precious articles;precious articles;

5. Vehicles licensed for general transport use.5. Vehicles licensed for general transport use.

（（ IIII ）） SCOPE OF COVERSCOPE OF COVER

1. Fire1. Fire

2. Explosion2. Explosion

3. Lightning;3. Lightning;

4. Hurricane, typhoon and tornado;4. Hurricane, typhoon and tornado;

5. Storm, tempest and flood; 5. Storm, tempest and flood;

6. Hailstorm;6. Hailstorm;

7. Landslide, rockslide, avalanche;7. Landslide, rockslide, avalanche;

8. Volcanic explosion;8. Volcanic explosion;

9. Subsidence of ground 9. Subsidence of ground

10. Crashing aircraft and parts or 10. Crashing aircraft and parts or articles falling from aircraft articles falling from aircraft and other flying objects;and other flying objects;

11. Bursting of water tank or pipe11. Bursting of water tank or pipe

(III) EXCLUSIONS(III) EXCLUSIONS1.1. Loss & damage by intentional act or Loss & damage by intentional act or

negligence of Insured negligence of Insured

2.2. Loss of or damage by earthquake or Loss of or damage by earthquake or tsunami; tsunami;

3.3. Depreciation, loss of market, loss of use Depreciation, loss of market, loss of use

4.4. Loss of or damage from war, warlike Loss of or damage from war, warlike operation, hostilities, armed conflicts, operation, hostilities, armed conflicts, terrorism, conspiracy insurrection, strike, terrorism, conspiracy insurrection, strike, riot, and civil commotion;riot, and civil commotion;

5.5. Confiscation, requisition, destruction or Confiscation, requisition, destruction or damage by any action or order of any damage by any action or order of any government or by any public authorities; government or by any public authorities;

1.1. Loss of or damage directly or indirectly Loss of or damage directly or indirectly caused by nuclear fission, nuclear caused by nuclear fission, nuclear fusion, nuclear weapon, nuclear fusion, nuclear weapon, nuclear material, nuclear radiation and material, nuclear radiation and radioactive contamination;radioactive contamination;

2.2. Loss or damage caused by pollution of Loss or damage caused by pollution of any kind or description any kind or description

3.3. The deductibles stated in policy to be The deductibles stated in policy to be borne by the Insured;borne by the Insured;

4.4. Loss or damage from any other perils Loss or damage from any other perils not listed in this Policy.not listed in this Policy.

(IV) TREATMENT OF CLAIM(IV) TREATMENT OF CLAIM

The Company shall at its option, indemnify the The Company shall at its option, indemnify the Insured in respect of loss or damage:Insured in respect of loss or damage:

Paying the amount of the actual value of the Paying the amount of the actual value of the property lost or damaged or;property lost or damaged or;

Paying the necessary cost of repairing or Paying the necessary cost of repairing or restoring the damaged property to its nearest restoring the damaged property to its nearest condition immediately preceding the damage or; condition immediately preceding the damage or;

Repairing or restoring the damaged property to a Repairing or restoring the damaged property to a condition near to other property of like kind and condition near to other property of like kind and quality.quality.