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How to calculate an appropriate sum for cargo insurance - Part 2
An insurance company’s assessment of the appropriate sum to insure used machinery is usually based on two factors:
- Whether there is a great difference between the machinery’s market value and its new for old value as the sum insured. For example, the market value of the used machinery is HK$500,000, but its new for old value is HK$2,000,000. Due to the great difference in the two values, customers are advised to declare and explain the reasons for the difference to the insurance company for their underwriting calculations of the sum insured.
- An insurance company usually requires the insured to include related miscellaneous expenses/charges into the sum insured. For example, if the insured has paid in advance for storage of machinery after arrival and if the machinery was damaged during transit, the insured will bear a loss of the advance payment for storage. Therefore, the insured should include all related expenses to protect against any potential loss.
In conclusion, customers should disclose all details to the insurance company, so the insurance company can work out an appropriate sum insured for used machinery.