What is the usual basis of premium calculation for the money section under a combined insurance policy?

The correct basis of premium calculation for the money section under a combined insurance policy is typically the average of the previous three years' carryings. This method provides a reliable estimate of the risk because it reflects historical data relevant to the business's financial activities. By averaging the past three years, insurers can account for fluctuations in the amount of money handled, ensuring that the premium is both fair and reflective of the actual exposure to risk.

Using the average helps mitigate the risk of substantial fluctuations in income that can happen year to year, allowing for a more stable and predictable premium calculation. This approach balances the insurer’s need for adequate coverage against the insured party's ability to manage their insurance costs effectively.

Other options, such as an annual declaration of actual carryings, may require frequent adjustments and reporting, which can add administrative complexity. A limit of reassurance chosen at inception could misrepresent actual risk exposure if the assumptions made at that time do not align with future business activities. Lastly, calculating a premium based on a percentage of annual turnover may not accurately reflect the risk associated with the amount of cash held or managed, which is a key factor for the money section coverage.