What is 'Value Reporting Form'

Value reporting form, also sometimes called a stock reporting form, is an insurance form that is used to provide the variable coverage amounts needed by commercial businesses that carry irregular inventories throughout the year.

BREAKING DOWN 'Value Reporting Form'

The value reporting form is used to report inventory values periodically to the insurance company, which in turn adjusts the amount of coverage to reflect current merchandise stocks. Using a value reporting form can help businesses avoid being over- or underinsured.

Some commercial businesses have inventories that vary greatly throughout the year depending on supply and demand, seasonal factors and consumer needs. These companies can maintain a more appropriate level of coverage by adjusting each month's or each quarter's insurance needs based on current inventories. The value reporting form is used to reflect the dynamic inventory values.

Businesses might report the current cash value of their inventory on a monthly or quarterly basis; the amount of their policy coverage is adjusted accordingly. On an annual basis, the business might then either get a refund or pay an additional premium, depending on the coverage level over the length of the policy term.

For example, Pennsylvania Lumbermens Mutual Insurance Company notes that it's difficult for policyholders to calculate precise inventory levels, given fluctuations over the years.

"Our Stock Reporting Form gives insureds a chance to report inventory levels monthly so PLM can ensure that you have enough coverage in your time of need without paying more than necessary," the company explains.

The form itself is fairly basic, simply asking insured business to submit a monthly tally of their "Furniture, Fixtures, Machinery, Equipment, and/or Improvements and Betterments," with a value assigned to each new addition.

A closer look at how value reporting form works

In her book, The Savvy Businessperson's Guide to Property & Casualty Insurance: Applications and Practices, Karin A. Fleischhaker explained more:

"If your stock fluctuates monthly, but it is not a seasonable fluctuation, a stock reporting form may be required," she wrote. "Under the stock reporting form, you include a limit which is the highest provisional limit you may anticipate for your stock in any given month. Since the stock limits are not anticipated to reach the provisional limit consistently throughout the policy term, your underwriter will charge you a premium which is 75 percent of the provisional limit which takes into consideration the anticipated monthly average value."

For businesses submitting data stock levels on a monthly basis, they'll usually be required to submit a value reporting form to the insurance company "within 10 days following the end of the 30 day period," she added. "You may have been charged a provisional annual premium or 75 percent based on the highest limit anticipated, or you may pay a deposit followed by monthly payments based upon a rate per $100 of values reported. If at some time your stock exceeds the provisional limit, it should be increased immediately."

At the end of a given policy period, "an audit will be performed," Fleischhaker wrote. "This audit will add all the values reported monthly and divide the total value by 12 months to arrive at an average monthly value of stock. This average will be multiplied by the applicable annual rate to determine an earned premium. The provisional premium then shall be deducted from the earned premium and you may receive an additional or return premium."

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