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What is First loss basis Insurance?

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Burglary or theft insurance covers any loss or damage to your property or belongings by means of burglary or theft within the premises as prescribed in the insurance policy. Every home, company or institution needs to be protected against any potential breakage from a third party which is when burglary or theft insurance comes in handy. How is first loss policy related, read on?

What is first loss basis insurance?

While burglary provides full coverage to your belongings and properties, first loss offers only partial coverage, where the insured agrees to an amount that is less than the original value of goods or belongings that is damaged, stolen or destroyed. The insurer also comes to an understanding not to imprison the insured for under-insuring the property and goods. Used commonly in burglary and theft insurance, first loss basis insurance often covers the largest possible loss, leaving out on minor damages.

First loss basis insurance provides coverage against events where there is a total loss due to burglary or theft mostly in the case of a large store where all the items have been taken away. Hence, the insured does not pursue compensation for any loss caused to minor belonging.  Even the premiums are not calculated based on the total value of full goods or the property.

To make first loss policy more clear

A shop owner has a shop worth three lakhs of goods and he took the first loss insurance policy thinking that he would lose only one lakh worth of goods at a time due to burglary or theft. In this case, where a burglary occurs in the shop on the basis of first loss policy, the insured or the store owner will only get one lakh coverage even if the loss incurred is more than that. If the shop owner lost more than 2 lakhs worth goods or property due to burglary or theft, the insured will only be compensated for one lakh on first loss basis policy.

Who can take first loss insurance policy?

  • First loss insurance policy can be taken for those who have a business with large stock of Goods but less risk of a large scale theft.

Benefits of first loss insurance policy

  • The insured will only have to pay a lower premium while receiving partial protection for the same.
  • Beneficial for small business without a large inventory, where the total value of goods will be moderate and not huge hence first loss insurance will be affordable and effective by the insured.

Hence depending on your business and the value of goods and property involved, you may choose whether to choose burglary or theft insurance or first loss basis insurance policy.

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  1. This is a cheaper option for those who want insurance, but cannot afford to cover absolutely everything. It seems like insurance policies are available to everyone no matter what their budget or assets. First loss will cover a lot of your losses, but not wholly – and that is one consideration to make when signing a first loss insurance policy: how much will you actually get back in case of theft?

  2. I totally agree with Miss Kitty. First loss basis insurance is a cheaper version of burglary or theft insurance. It is like getting partial recovery of the losses incured. But how is this partial recovery calculated? Is it beneficial? Is it not done just for the namesake? But it is no doubt helpful to the small business houses.

  3. This was a new read for me , the author did a god job of explaining what first loss insurance is , with the help of the example at the end. But there remains the question of which property is more valuable to the insured , and it might not always be of monetary value. There could be sentimental value attached to certain things as I’m sure there are. I would be happy to see some clarification on this.

  4. In order your business will operate as it should, you need to take care of several different angles. One of them is also a potential loss of your merchandise. As you know best how your business operates it is also your decision which kind of insurance will you engage. Articles like this can truly help you with your decision.

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