Payment of claims under MBD policy

MBD policy is not an All risk cover although it is mentioned that it covers loss or damage to insured property by any peril not excluded in policy. 
If you look at exclusions, you will find that policy excludes all possible causes other than electrical or mechanical breakdowns.
Depreciation is not applied on parts other than having limited life. This is important to understand that adequacy of sum insured is checked by comparing it with replacement value of new machinery of same make & capacity as on date of loss and adequacy of sum insured is required to be checked in each claim whether depreciation is applied or not.

Total loss claims are settled at Market value as on date of loss or sum insured, whichever is less. Market value is invariably calculated by applying depreciation on current replacement value of new machinery of similar make and type.
Reason for this so called anamoly is that It is one of the policy condition which is inserted  because we cover only electrical or mechanical breakowns with the result the possibility of total loss is very rare and in 99% of the cases, machinery is repaired by replacing damaged parts.

Comments

  1. UnknownSeptember 23, 2020 at 2:00 PM

    if total loss is rare why reinstatement model of indemnity can not be passed on to total loss claims in MBD.

    ReplyDelete
    Replies
    1. V.P SharmaOctober 1, 2020 at 11:29 PM

      We are guided by policy terms and conditions and are not allowed to make any alterations even if we are convinced

      Delete
  2. UnknownSeptember 23, 2020 at 2:02 PM

    Another related question if the sum insured represents the new replacement cost then why depreciated cost is paid on total loss claim in MBD.

    ReplyDelete
    Replies
    1. UnknownJanuary 5, 2022 at 10:44 PM

      Most of the mbd claims are partial losses, chances of total loss is very minimal,as per policy terms we have to indemnify the insured

      Delete
  3. UnknownJanuary 24, 2022 at 1:23 PM

    Why the depreciation is not applicable on partial loss although some big generator's parts having huge amount.

    ReplyDelete
  4. RashidGhaffarAugust 19, 2024 at 8:01 PM

    Please respond to "If the sum insured represents the new replacement cost then why depreciated cost is paid on total loss claim in MBD."

    ReplyDelete
    Replies
    1. Vishnu SharmaSeptember 8, 2024 at 11:57 AM

      As per principle of indemnity in the event of total loss, market value settlement of claim is done.

      Delete
  5. RashidGhaffarAugust 19, 2024 at 8:02 PM

    Please

    ReplyDelete

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