Capital additions Clause


Capital addition Clause is normally given in large risk policies. This states that during the course of policy, insured can go for capital additions without waiting for company's approval the extent of the agreed limit which is normally kept at 10% of total sum insured.


Underwriters need to be careful while agreeing to this add on cover because most of the times it is demanded without mention of payment of additional premium.

This is a risky because I have seen one case where 10% capital addition clause was given and during the policy period a newly constructed block valued Rs 1200 crore was added free of cost  under 10% capital addition clause granted without the mention of payment of additional premium. We then realized the importance of this cover which cost us crores of additional premium.

Large risk policy can be given only where MD + BI sum insured  at any one location  exceeds Rupees 2500 crores.


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