Fire Insurance
What is the fire insurance?
Fire insurance is a form of property insurance that covers damage and losses caused by Fire & Allied Perils. Most policies come with some form of fire protection, but homeowners may be able to purchase additional coverage in case their property is lost or damaged because of fire.
Features of Fire Insurance
Insurable Interest
This is the first essential characteristic of fire insurance. To be insured by fire insurance, you must have an insurable interest in the property. That means you must benefit from the property’s survival and suffer from its destruction. The insurable interest must exist both at the time of taking the policy and when filing a claim.
Utmost Good Faith
You and the insurer must act with utmost good faith while entering a fire insurance contract. As a policyholder, you must disclose all the relevant information about the property, such as its location, construction, contents, and fire hazards.Any misrepresentation or concealment of facts can make the contract void. Similarly, the insurer must provide all the details about the policy, such as its coverage, exclusions, terms, and conditions.
Contract of Indemnity
It is a contract of indemnity. The insurer will only reimburse you for the original loss or damage caused by Fire & Allied Perils and up to the sum insured. You cannot make any profit from the insurance claim. The insurer will also deduct the depreciation and salvage value of the property from the claim amount.
Direct Cause of Loss
The fire insurance policy will only cover the loss directly caused byFire & Allied Perils .The fire must be accidental and beyond the control of the policyholder. The policy will not cover the loss or damage caused by other factors, such as water, theft, or explosion, unless they are specifically included.
Description of Property
You must provide a full and accurate description of the property to be insured by fire insurance. You must also specify the property’s location, nature, value, and contents. Also, inform the insurer about any changes or modifications in the property that may affect the fire risk.
Personal Insurance Contract
The fire insurance contract is a personal insurance contract based on the relationship between the policyholder and the insurer.You cannot transfer the policy to another person without the insurer’s consent. If you sell or transfer the ownership of the property to someone else, the policy will automatically terminate.
Personal Right
The insured has a personal right to claim compensation from the insurer in case of fire loss or damage. Unless the insurer agrees, they cannot assign this right to anyone else. The insured can also sue the insurer for breach of insurance contract if the insurer fails to pay the claim
Property Coverage
As discussed, the policy explicitly covers property loss and damage resulting from fire and other associated risks.
The property it usually covers includes buildings, machinery, furniture, fixtures, stock, raw materials, and goods in transit. One can choose the type and extent of property coverage based on their needs and preferences.
Valuation of Property
Fire insurance policies value the insured property based on either replacement or market value. Replacement value is the amount required to replace the damaged or lost property with a new one of the same kind and quality.Market value is the amount the property would fetch in the open market at the time of the loss. You can opt for either replacement or market value based on convenience and affordability.
Premium Determinants
The policy determines the premium based on various factors, such as the property’s type and value, risk exposure and location, duration and scope of the policy, add-on covers and discounts availed, etc. However, you may lower the premium by opting for higher deductibles, a lower sum insured, or a longer policy term.