First Loss Agreement
Some non-life insurance plans have a “first loss” option (or “initial loss coverage”). In this agreement, the policyholder and the insurer agree on insurance coverage lower than the actual value of the insured property. This is a form of partial insurance in which the insured decides that he cannot suffer a total loss and chooses a maximum amount to be insured for each loss. First Loss Policies are often used in the theft insurance of high-quality goods that would be physically impossible to steal in the event of a single burglary. The most important thing is that the first damages are only used for initial damage policies whose average does not apply. Otherwise, the amount of insurance should represent the total value, otherwise you will not receive full payment of a claim. A non-life insurance in which the policyholder organizes coverage for an amount lower than the total value of the insured and in which the insurer imposes not to sanction the policyholder for an underinsurance. The main application of these guidelines is in situations where a total loss is practically impossible. For example, a large warehouse may hold wines and spirits worth £2.5 million, but the owner may feel that no more than £500,000 worth a moment could be stolen. The solution is a first loss policy that handles all claims up to £500,000, but pays no more than that figure if more is stolen. Initial damage policies are different from co-insurance contracts with policyholders in that the insured is not involved in damages below the level of the first damage and premiums are not prorated.
In the example above, the premium can reach 80-90% of the premium on the total value. A particular average means partial loss, i.e. free of certain averages, without partial losses or only total loss. FPA is a set of transport insurance conditions that offer very narrow coverage (but not only at total loss!). The terms of the FPA have generally been replaced by the more modern Cargo Clauses C establishments. Insurance companies can rarely bear a total loss for the business offered to them. They usually choose to share the risk with other insurers through co-insurance or reinsurance. . .