Dear Policy Holder,
In order to avoid problems due to under-insurance on your property, we would like to propose that you update your current sum insured on an annual basis or once every two years, if appropriate, for your adequate protection. This scenario is further explained by the “average clause” condition under the standard fire policy, as follows:
“if the property hereby insured shall at the breaking of any collectively of greater value than the sum insured thereon, then the insured shall be considered as being his/her own insurer for the difference and shall bear a ratable proportion of the loss accordingly.”
FORMULA: AMT. OF SETTLEMENT = SUM INSURED x AMOUNT OF LOSS
VALUE OF PROPERTY
Sum Insured = Php 500,000.00 (declares amount of cover)
Sum Insured = Php 1,000,000.00 (actual value of property)
Case 1 : TOTAL LOSS CLAIM
Case 2 : PARTIAL LOSS-REPAIR ESTIMATE OF PHP 500,000.00
Case 1: Settlement Amount:
(Note: in case of a total loss, the amount to be paid is equal to the Sum Insured only)
Case 2: Settlement Amount:
The above examples will give you an idea about the impact of under-insurance. If there is a need to correct your property’s worth, it is best to have it evaluated by a professional appraisal company.
For simple structures, such as class “A” residential building, you may use the floor area method to get the sum insured (ex. Php 30,000/sq.m x 240 sq m = Php 7,200,000.00) the value of Php 30,000.00/sqm. is for illustration purposes only. This amount will vary depending on the kind of materials used for construction. For contents, the acquisition cost of the declared items is used as a basis for the sum insured.
Should you have any more questions, please do not hesitate to call or email us so that we could immediately accommodate you.