01 / The meaning
What it means.
A claim must first meet the relevant cover requirements; the settlement basis then helps answer what the insurer may do or pay. A property schedule’s sum insured is not itself a promise of new replacement. Different asset classes can use different methods, and a policy may give the insurer options to repair, replace or settle in money. Read the relevant section and endorsements together.
Conditions can affect the result, including whether replacement actually occurs, timing requirements, depreciation, betterment, excesses, salvage and underinsurance provisions. GST treatment and the insured’s entitlement to input tax credits can also matter to a business calculation. Separate the cost of physical repairs from lost income or additional operating expenses under another section. Obtain an itemised explanation where the proposed settlement differs from the business’s repair or replacement estimate.
02 / Put it in context
A practical example.
Hypothetical example: a damaged production machine can be repaired, but its owner would prefer a larger model. It asks the insurer to explain the accepted repair scope, any cash option and the treatment of the proposed upgrade before ordering replacement equipment.
This example illustrates the term. It does not predict a claim outcome.
03 / Read the detail
What to check.
- Identify the settlement method applying to each asset or policy section.
- Check conditions concerning replacement, timing, depreciation and insurer settlement options.
- Ask for an itemised calculation showing excesses, taxes and other adjustments.
04 / Start a useful conversation
A question for your broker.
How would this section calculate and deliver a settlement, and which conditions could change the amount we receive?
05 / Connect the terms
Keep the meaning in context.
06 / Apply it to your business
Related insurance guides.
Further reading
Read the source guidance alongside the relevant policy wording.
General information only. This does not take into account your objectives, financial situation or needs. Before acting, consider whether the information is appropriate for you. Cover is subject to insurer acceptance and the policy terms, conditions, limits and exclusions. Read the Financial Services Guide and the relevant PDS (where applicable) and/or policy wording before deciding.
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