{"id":1591,"date":"2017-08-29T05:33:20","date_gmt":"2017-08-29T05:33:20","guid":{"rendered":"https:\/\/pamstaging.securenow.in\/insuropedia\/?p=1591"},"modified":"2026-07-15T09:09:47","modified_gmt":"2026-07-15T09:09:47","slug":"contract-price-insurance-clause-property-insurance","status":"publish","type":"post","link":"https:\/\/securenow.in\/insuropedia\/contract-price-insurance-clause-property-insurance\/","title":{"rendered":"What is Contract Price Insurance Clause in Property Insurance?"},"content":{"rendered":"<div id=\"bsf_rt_marker\"><\/div><p>Property insurance covers the owners or the rental of the property against any damage or theft to the structure or its contents. It covers for perils like fire, smoke, wind, hail, lightning, theft, and burglary.<\/p>\n<p><a href=\"https:\/\/securenow.in\/property-insurance\">Property insurance policy<\/a> has various clauses and fire insurance is one of them. The fire insurance policy includes a clause called the contract price clause, covering goods sold but not yet delivered in case of damage.<\/p>\n<h2 data-path-to-node=\"3\">Key Takeaways<\/h2>\n<ul data-path-to-node=\"4\">\n<li>\n<p data-path-to-node=\"4,0,0\"><b data-path-to-node=\"4,0,0\" data-index-in-node=\"0\">The Predetermined Revenue Shield:<\/b> Inventory valuation changes at the point of sale; a specialized contract price clause ensures sold but undelivered inventory is covered at its final commercial invoice value.<\/p>\n<\/li>\n<li>\n<p data-path-to-node=\"4,1,0\"><b data-path-to-node=\"4,1,0\" data-index-in-node=\"0\">Insulating Against Canceled Contracts:<\/b> Supply chain disruptions can ruin client relationships; if a disaster occurs, the policy protects the vendor if the buyer decides to cancel the contract entirely or partially.<\/p>\n<\/li>\n<li>\n<p data-path-to-node=\"4,2,0\"><b data-path-to-node=\"4,2,0\" data-index-in-node=\"0\">Bypassing Raw Cost Valuation Limits:<\/b> While standard stock clauses pay only the basic cost of production, the contract price clause guarantees the insurance company is liable to pay based on the contract price.<\/p>\n<\/li>\n<li>\n<p data-path-to-node=\"4,3,0\"><b data-path-to-node=\"4,3,0\" data-index-in-node=\"0\">The Vulnerability of Final Transit Buffers:<\/b> Completed orders are exposed to risk right up until shipment, as seen when an unexpected blaze erupts the night before the delivery of the consignment.<\/p>\n<\/li>\n<li>\n<p data-path-to-node=\"4,4,0\"><b data-path-to-node=\"4,4,0\" data-index-in-node=\"0\">Punctual Premium Compliance:<\/b> Unlocking high-tier contract validation requires strict compliance, ensuring that policyholders who pay the premium on a regular basis receive rapid claim settlements.<\/p>\n<\/li>\n<li>\n<p data-path-to-node=\"4,5,0\"><b data-path-to-node=\"4,5,0\" data-index-in-node=\"0\">The Multi Peril Umbrella Framework:<\/b> Property protection blends multiple distinct lines into a single master shield, integrating structural rules with fire insurance, smoke, wind, hail, lightning, theft, and burglary covers.<\/p>\n<\/li>\n<\/ul>\n<figure id=\"attachment_1259\" aria-describedby=\"caption-attachment-1259\" style=\"width: 345px\" class=\"wp-caption alignright\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-1259 size-full\" title=\"home insurance\" src=\"https:\/\/securenow.in\/insuropedia\/wp-content\/uploads\/2017\/06\/home-insurance7.jpg\" alt=\"home insurance\" width=\"345\" height=\"230\" \/><figcaption id=\"caption-attachment-1259\" class=\"wp-caption-text\">Image Credit: mymutualfundsindia<\/figcaption><\/figure>\n<div class=\"react-scroll-to-bottom--css-ehgcx-1n7m0yu\">\n<div class=\"flex flex-col pb-9 text-sm\">\n<div class=\"w-full text-token-text-primary sm:AIPRM__conversation__response\" data-testid=\"conversation-turn-1757\">\n<div class=\"px-4 py-2 justify-center text-base md:gap-6 m-auto\">\n<div class=\"flex flex-1 text-base mx-auto gap-3 md:px-5 lg:px-1 xl:px-5 md:max-w-3xl group final-completion\">\n<div class=\"relative flex w-full flex-col agent-turn\">\n<div class=\"flex-col gap-1 md:gap-3\">\n<div class=\"flex flex-grow flex-col max-w-full\">\n<div class=\"min-h-[20px] text-message flex flex-col items-start gap-3 whitespace-pre-wrap break-words [.text-message+&amp;]:mt-5 overflow-x-auto\" data-message-author-role=\"assistant\" data-message-id=\"6fdf877f-b449-4832-a7a8-92db1c733cc3\">\n<div class=\"markdown prose w-full break-words dark:prose-invert light AIPRM__conversation__response\">\n<p>According to the clause, if the policyholder is accountable for delivering the goods as per the sale contract and the contract is terminated due to non-delivery, then the insured is protected against any loss or damage to the goods.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<p>When the insured enters into an agreement with the other party, the contract comes with all the material facts about the goods, their type, along their quantity. Sometimes, goods are sold and contracts signed, but before delivery to the third party, they sustain damage from perils like fire or flood.<\/p>\n<p>In such a case, the third party may cancel the contract with the seller of the goods. The contract can be canceled entirely or partially depending on the extent of loss or damage incurred.<\/p>\n<p>If the seller of the goods has purchased property insurance then he\/she can get the benefit of this policy. The insurance company, in such case, is liable to pay for the damaged goods based on the contract price.<\/p>\n<p>For instance, in the case of fire insurance, any loss\/damage happens to goods due to fire, after the contract is signed and goods are sold but before the delivery of goods, a fire erupted and damaged them. In this scenario, the seller of the goods can contact the fire insurance company to settle the claim.<\/p>\n<h2><strong>Case: Contract Price Insurance Clause in Property Insurance 1<\/strong><\/h2>\n<p>Rajesh, an owner of a small weaving business, had obtained a <a href=\"https:\/\/securenow.in\/property-insurance\">property insurance cover<\/a> to protect his goods in case of fire or any other peril. His business was booming, and he had entered into many contracts. Once, due to short-circuiting, a fire broke out in his premises where the goods were stored. The majority of the goods that were damaged were sold but yet not delivered.<\/p>\n<p>When the third-party to whom Rajesh had sold the goods came to know about the incident, they canceled the contract wholly. Rajesh immediately contacted his insurance company. After investigating the matter, the insurers determined that the goods were indeed damaged by fire.<\/p>\n<p>Also, Rajesh had properly adhered to the insurance policy and paid the premium on a regular basis. Hence the insurance company settled Rajesh\u2019s claim based on the contract price and covered his loss.<\/p>\n<p><strong>Read More: <\/strong><a href=\"https:\/\/securenow.in\/insuropedia\/who-should-buy-a-property-and-casuality-insurance\/\"><strong>Who should buy Property and Casualty Insurance?<\/strong><\/a><\/p>\n<h2><strong>Case: 2<\/strong><\/h2>\n<p>Working for the last five years in the corporate world, Ms. Rashmi Dua started her own boutique in Defense Colony, New Delhi. It was a small-scale business for which Rashmi took all steps to grow and protect it. Considering the risk that could arise to disrupt her business, she purchased a fire insurance policy. Rashmi knew the importance of having an insurance policy, and therefore, she was punctual when it came to paying a premium for the fire insurance policy. Last year, she bagged a big contract for ethnic clothes from R.J Clothing. It was her first big contract, and therefore, she did not want to take any risk with it. She employed some of its best employees, who completed the order within the deadline.<\/p>\n<p>Unfortunately, destiny had some other plans. The night before the delivery of the consignment, a fire erupted at the boutique due to an electrical fault. The items kept in the boutique caught fire immediately, which damaged the entire consignment of R.J Clothing. When the buyer came to know about the fire, it canceled the contract.<\/p>\n<h3>Summary Table: Underwriting Framework and Application of the Contract Price Insurance Clause<\/h3>\n<table data-path-to-node=\"1\">\n<thead>\n<tr>\n<td><strong>Policy Mechanism<\/strong><\/td>\n<td><strong>Technical Operational Trigger<\/strong><\/td>\n<td><strong>Financial Settlement Metric<\/strong><\/td>\n<td><strong>Primary Risk Mitigation Focus<\/strong><\/td>\n<td><strong>Case Study \/ Scenario Context<\/strong><\/td>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td><span data-path-to-node=\"1,1,0,0\"><b data-path-to-node=\"1,1,0,0\" data-index-in-node=\"0\">Contract Price Clause<\/b><\/span><\/td>\n<td>Activates when goods are sold, and a contract is signed, but physical damage occurs before the delivery of goods.<\/td>\n<td>Settles the claim strictly based on the contract price explicitly locked in with the buyer.<\/td>\n<td><span data-path-to-node=\"1,1,3,0\">Prevents loss of contracted revenue when a buyer terminates the agreement due to non-delivery.<\/span><\/td>\n<td><span data-path-to-node=\"1,1,4,0\">A boutique owner lost a completed ethnic clothing consignment the night before shipment.<\/span><\/td>\n<\/tr>\n<tr>\n<td><span data-path-to-node=\"1,2,0,0\"><b data-path-to-node=\"1,2,0,0\" data-index-in-node=\"0\">Contract Termination Cover<\/b><\/span><\/td>\n<td>Triggered if the third-party purchaser decides to cancel the contract wholly or partially.<\/td>\n<td><span data-path-to-node=\"1,2,2,0\">Reimburses the full pre-agreed sales invoice value rather than raw manufacturing cost prices.<\/span><\/td>\n<td><span data-path-to-node=\"1,2,3,0\">Absorbs the commercial impact of broken agreements caused by sudden on-site perils.<\/span><\/td>\n<td><span data-path-to-node=\"1,2,4,0\">A corporate clothing client voided a major order after a retail facility caught fire.<\/span><\/td>\n<\/tr>\n<tr>\n<td><span data-path-to-node=\"1,3,0,0\"><b data-path-to-node=\"1,3,0,0\" data-index-in-node=\"0\">Standard Fire &amp; Special Perils<\/b><\/span><\/td>\n<td>Direct combustion triggered by an electrical fault or widespread localized flooding.<\/td>\n<td><span data-path-to-node=\"1,3,2,0\">Pays out for completed products, raw stock, or structural shell damage within active limits.<\/span><\/td>\n<td><span data-path-to-node=\"1,3,3,0\">Transfers unpredictable operational and systemic network risks onto the underwriter.<\/span><\/td>\n<td><span data-path-to-node=\"1,3,4,0\">A small manufacturing weaving firm suffered a severe storage blaze due to line short-circuiting.<\/span><\/td>\n<\/tr>\n<tr>\n<td><span data-path-to-node=\"1,4,0,0\"><b data-path-to-node=\"1,4,0,0\" data-index-in-node=\"0\">Umbrella Property Cover<\/b><\/span><\/td>\n<td>Master contract containing specific internal property clauses like fire and burglary insurance.<\/td>\n<td><span data-path-to-node=\"1,4,2,0\">Balances fixed real estate building values against mobile physical inventory metrics.<\/span><\/td>\n<td><span data-path-to-node=\"1,4,3,0\">Provides a unified safeguard covering structural asset theft, smoke, hail, and lightning.<\/span><\/td>\n<td><span data-path-to-node=\"1,4,4,0\">Small-scale entrepreneurs maintain transactional safety nets by paying structural premiums punctually.<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<h4><strong>Read More: <\/strong><a href=\"https:\/\/securenow.in\/insuropedia\/what-is-not-covered-burglary-insurance-bought-property-insurance\/\"><strong>What is not covered under Burglary Insurance bought as Property Insurance?<\/strong><\/a><\/h4>\n<p>In this case, though the consignment was already sold, the loss happened before the delivery. Rashmi approached her fire insurance company and agreed to settle the claim, which happened due to fire loss. The insurance company settled the claim on the basis of the contract price of the insurance policy.<\/p>\n<h3 data-path-to-node=\"6\">Frequently Asked Questions (FAQs)<\/h3>\n<h4 data-path-to-node=\"7\"><b data-path-to-node=\"7\" data-index-in-node=\"0\">1. What is the contract price clause in a fire insurance policy?<\/b><\/h4>\n<p data-path-to-node=\"7\"><strong>A)<\/strong> The contract price clause is a specialized property insurance provision configured to protect manufacturing and retail inventory after a formal transaction has occurred. It dictates that if goods are sold but suffer physical damage or destruction before they are officially transferred to the buyer, the underwriter will evaluate the loss using the final sales invoice value rather than the raw cost of materials.<\/p>\n<h4 data-path-to-node=\"8\"><b data-path-to-node=\"8\" data-index-in-node=\"0\">2. How does a contract price insurance clause protect a seller if a buyer cancels an order?<\/b><\/h4>\n<p data-path-to-node=\"8\"><strong>A)<\/strong> When an unexpected disaster like a fire or flood hits a warehouse, the purchasing party frequently exercises their legal right to terminate the supply agreement due to non-delivery. If the merchant carries a standard property policy featuring this clause, the insured is protected against any loss or damage to the goods, allowing them to recover their anticipated contract revenue directly from the underwriting company.<\/p>\n<h4 data-path-to-node=\"9\"><b data-path-to-node=\"9\" data-index-in-node=\"0\">3. What happens if goods are damaged by an electrical fault the night before delivery?<\/b><\/h4>\n<p data-path-to-node=\"9\"><strong>A)<\/strong> If a sudden fire erupts at a boutique or factory due to an electrical fault or short-circuit, any completed consignments awaiting transit are highly vulnerable. Under this operational scenario, even though the order was technically sold, the physical risk remained with the seller. The merchant can immediately approach their carrier to adjust the file on the basis of the contract price of the insurance policy.<\/p>\n<h4 data-path-to-node=\"10\"><b data-path-to-node=\"10\" data-index-in-node=\"0\">4. Can a buyer partially cancel a sales contract under this property insurance framework?<\/b><\/h4>\n<p data-path-to-node=\"10\"><strong>A)<\/strong> Yes. Depending on the physical scope of the structural disaster and how much inventory survives, a third-party purchaser can choose to cancel the contract wholly or partially. The insurance surveyor will then audit the remaining fulfillment capacity, calculate the exact volume of ruined goods, and settle the disrupted portion of the contract up to the active sum insured boundaries.<\/p>\n<h4 data-path-to-node=\"11\"><b data-path-to-node=\"11\" data-index-in-node=\"0\">5. Does standard property insurance cover goods sold but not yet delivered?<\/b><\/h4>\n<p data-path-to-node=\"11\"><strong>A)<\/strong> Standard baseline property contracts typically value general stock in trade at its raw cost of production or acquisition landing price, which excludes your profit margins. To ensure that high-value orders already committed to buyers are protected at their true commercial value, businesses must verify that their policy explicitly includes the contract price clause covering goods sold but not yet delivered.<\/p>\n<h4 data-path-to-node=\"12\"><b data-path-to-node=\"12\" data-index-in-node=\"0\">6. What perils are commonly covered under a comprehensive commercial property policy?<\/b><\/h4>\n<p data-path-to-node=\"12\"><strong>A)<\/strong> A master commercial contract functions as a broad financial shield for business owners, protecting both real estate structures and internal contents. A standard framework handles a diverse array of environmental and man-made hazards, reimbursing the enterprise for sudden losses triggered by fire, smoke, wind, hail, lightning, accidental water damage, theft, and burglary.<\/p>\n<p><script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"FAQPage\",\n  \"mainEntity\": [\n    {\n      \"@type\": \"Question\",\n      \"name\": \"What is the contract price clause in a fire insurance policy?\",\n      \"acceptedAnswer\": {\n        \"@type\": \"Answer\",\n        \"text\": \"The contract price clause is a specialized property insurance provision configured to protect manufacturing and retail inventory after a formal transaction has occurred. 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A standard framework handles a diverse array of environmental and man-made hazards, reimbursing the enterprise for sudden losses triggered by fire, smoke, wind, hail, lightning, accidental water damage, theft, and burglary.\"\n      }\n    }\n  ]\n}\n<\/script><\/p>\n<h4><b>About The Author<\/b><\/h4>\n<p><strong>Shivani<\/strong><\/p>\n<p><span style=\"font-weight: 400;\">MBA Insurance and Risk<\/span><\/p>\n<p><span style=\"font-weight: 400;\">She has a passion for property insurance and a wealth of experience in the field, Shivani has been a valuable contributor to SecureNow for the past six years. As a seasoned writer, they specialize in crafting insightful articles and engaging blogs that educate and inform readers about the intricacies of property insurance. <\/span><span style=\"font-weight: 400;\">She brings a unique blend of expertise and practical knowledge to their writing, drawing from her extensive background in the insurance industry. Having worked in various capacities within the sector, she deeply understands the challenges and opportunities facing property owners and insurers alike.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Property insurance covers the owners or the rental of the property against any damage or theft to the structure or its contents. It covers for perils like fire, smoke, wind, hail, lightning, theft, and burglary. Property insurance policy has various clauses and fire insurance is one of them. The fire insurance policy includes a clause [&hellip;]<\/p>\n","protected":false},"author":5,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"om_disable_all_campaigns":false,"_lmt_disableupdate":"no","_lmt_disable":"no","_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[989,6],"tags":[193],"class_list":["post-1591","post","type-post","status-publish","format-standard","hentry","category-product-features-property-insurance","category-property-insurance","tag-property-insurance"],"acf":[],"modified_by":"SecureNow","_links":{"self":[{"href":"https:\/\/securenow.in\/insuropedia\/wp-json\/wp\/v2\/posts\/1591","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/securenow.in\/insuropedia\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/securenow.in\/insuropedia\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/securenow.in\/insuropedia\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/securenow.in\/insuropedia\/wp-json\/wp\/v2\/comments?post=1591"}],"version-history":[{"count":15,"href":"https:\/\/securenow.in\/insuropedia\/wp-json\/wp\/v2\/posts\/1591\/revisions"}],"predecessor-version":[{"id":36565,"href":"https:\/\/securenow.in\/insuropedia\/wp-json\/wp\/v2\/posts\/1591\/revisions\/36565"}],"wp:attachment":[{"href":"https:\/\/securenow.in\/insuropedia\/wp-json\/wp\/v2\/media?parent=1591"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/securenow.in\/insuropedia\/wp-json\/wp\/v2\/categories?post=1591"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/securenow.in\/insuropedia\/wp-json\/wp\/v2\/tags?post=1591"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}