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Nature and Scope of Fire Insurance
Nature and Scope of Fire Insurance
1
Characteristics of Fire Insurance
Covenant of Good Faith: The policy is on the premise of faith between the
insurer and the insured. It is essential for both the parties to reveal all the facts
at the time of policy initiation.
Covenant of Indemnity: It is an indemnity policy wherein the insurer is liable
to cover for the loss that occurred. In case of a fire-break with no loss, no
insurance liability will be offered.
One-year Policy: The term fire insurance policy is generally for a year but it can
be renewed depending on the terms and conditions mentioned in the policy
schedule.
Insurable Interest: The policy is valid when the insured has an insurable
interest in the insured property. In case a loss occurs, such interest may be
required. This is beneficial to the insured by the survival of the insured
property and under a situation of destruction may face a loss as well.
Direct Loss: If the root cause of the loss or damage is fire, one may avail of this.
Personal Right: In case of any loss/damage under any unfortunate
circumstances, the insured amount will be provided to the person whose name
is mentioned in the policy document.
Personal Insurance Contract: The important feature this policy requires is
being pellucid completely. An insurer needs to know the behaviour of the
insured. Moreover, only the policyholder can transfer the policy with the
consent of the insurer. Besides, an insurer has all the rights to terminate the
policy on the grounds wherein the possession of goods is transferred to a
third-party.
Property Description: While buying a fire insurance policy it is imperative to
give a proper account of the possession. This is essential because as per the
location addressed in the document of the policy, the claims will be settled if in
case any unfortunate event occurs at the insured place. In case if there is any
change, it needs to be brought into the notice of the insurer to avoid further
upshot.
2
Types of Fire Insurance in India
Specific Policy: Under this policy, for a certain property, a specified sum
insured is determined and in case of any loss, the compensation will be
provided for the loss provided it is less than the determined amount.
Comprehensive Policy: This policy provides extensive coverage not only
against fire-related perils but also provides coverage against any other perils,
such as robbery, burglary, civil rampage, etc.
Valued Policy: At the initiation of the policy, the value of a particular property
is determined. On the premise of the value of the property, the insurance of
the policy is decided wherein the insurer will pay the value in the case of
destruction of property by fire.
Floating Policy: This type of policy is best suited for owners who run a business
of import and export. This policy will provide you with coverage securing your
goods lying at various places. It is to be noted that the goods need to belong to
the same individual under one sum assured and one premium covering all the
perils related to the goods.
Consequential Loss Policy: A fire-outbreak in a workplace like in a factory may
disrupt the workforce that is production might go down but the fixed expenses
continue at the same price. This policy essentially provides coverage for
consequential loss or loss of profits. On the premise of loss of sales, the loss of
gains is calculated.
Replacement Policy: In this policy, the insurance provider assures
compensation for the loss of the premise of the property’s market value. After
contemplating the depreciating value o the property, the amount that is to be
compensated is calculated. The compensation provided will be at the
replacement price, which implies that the new asset will be of the price that
has been lost. It is to be noted that there will not be any additional expense as
the compensation provided will be on the new asset’s market price.