In Malaysia’s commercial burglary insurance, First Loss Basis and Full Value Basis (Full Theft Loss) are two core sum-insured approaches, with distinct risk assumptions, coverage rules, and premiums.
Key Differences
| Feature | First Loss Basis | Full Value Basis (Full Theft Loss) |
| Risk Scenario | Total theft of all insured items is impossible (e.g., large warehouse stock, fixed assets) | Total theft of all insured items is possible (e.g., small shop, high-value portable goods) |
| Sum Insured | Based on maximum probable single loss (not full total value); no Average Clause penalty for under-insuring the total | Based on highest total value at risk; must be adequate to avoid Average Clause (partial payout if under-insured) |
| Premium | Lower, calculated on the first-loss limit (not full value) | Higher, calculated on the full total value at risk |
| Claim Payout | Up to the first-loss limit only (excess loss self-insured) | Up to the sum insured (or market value, subject to policy terms) |
Practical Examples (Malaysia)
- First Loss: A hypermarket insures RM200k as first-loss (max likely stolen in one burglary), while total stock is RM2m. Premium is based on RM200k, not RM2m, payout capped at RM200k.
- Full Value: A luxury watch boutique insures RM500k (full stock value). If under-insured to RM300k and all RM500k stock is stolen, the Average Clause applies: payout=(300k/500k) × 500k=RM300k.
Eligibility & Tips
- First Loss is often capped at ≤25% of total property value by insurers in Malaysia (varies by policy).
- Full Value requires accurate valuation (e.g., monthly stock declarations for seasonal businesses) to avoid under-insurance penalties.
- Choose First Loss if theft of your entire inventory is logistically unfeasible; choose Full Value if your goods are highly portable and vulnerable to total theft.
