Fire Insurance Claims

Why does a prudent businessman prefer to take out an insurance policy to cover the risk of loss due to fire?

• To destroy assets

• To create dislocation in the usual working of a business concern

• To compensate for the loss of assets

• To increase the risk of loss due to fire

What is the procedure for claiming the loss of stock due to fire?

• Calculate the amount of stock lost by fire

• Calculate the percentage of gross profit

• Prepare a Trading Account

• All of the above

How is the amount of claim calculated if there is an average clause in the insurance policy?

• Policy Amount / Stock on the date of fire * Stock lost by fire

• Policy Amount * Stock lost by fire / Stock on the date of fire

• Policy Amount * Stock on the date of fire / Stock lost by fire

• Policy Amount / Stock lost by fire * Stock on the date of fire

What is the purpose of the average clause in a fire insurance policy?

• To discourage under insurance of stock

• To encourage under insurance of stock

• To increase the amount of claim

• To decrease the amount of claim

How is the rate of gross profit determined for calculating the stock on the date of fire?

• By taking the average rate of gross profit of previous years

• By estimating the rate of gross profit for the current year

• By considering the rate of gross profit of the just preceding year

• By taking the highest rate of gross profit of previous years

What is the formula to calculate the actual amount of loss of stock?

• Stock on the date of fire - Salvage

• Stock on the date of fire + Salvage

• Stock on the date of fire * Salvage

• Stock on the date of fire / Salvage

How is the amount of claim calculated if the policy amount and rate of gross profit are not given?

• Actual amount of loss

• Stock on the date of fire

• Salvage

• None of the above

What is the purpose of preparing a Memorandum Trading Account?

• To calculate the amount of claim

• To determine the rate of gross profit

• To estimate the value of stock on the date of fire

• To record the purchases and sales of the business