Definition of Fire Insurance: The insurance contract in which the insurer undertakes to pay compensation for the loss of property, stock of the insured due to fire against the premium paid by the insured, is called Fire Insurance.
Types of Fire Insurance:
Fire Insurance may be classified into five categories; namely-
- Full Insurance,
- Over Insurance,
- Under Insurance,
- Double Insurance, and
These are discussed below-
1. Full Insurance: If the policy amount of insurance is just equal to the actual value of the subject matter of insurance, the insurance is called Full Insurance.
2. Over-Insurance: If the policy amount of insurance is more than the actual value of the subject matter of insurance, the insurance is called Over-Insurance.
3. Under-Insurance: If the policy amount of insurance is less than the actual value of the subject matter of insurance, the insurance is called over-Insurance.
4. Double Insurance: When the same property is insured with more than one insurers the one insurer, the insurance is called Double insurance.
5. Re-Insurance: When an insurer feels that it is not possible for him alone to bear the entire risk of loss of insured property, he can ensure the entire property or a part it with another insurance company. In this way, when an insurer gets his risk insured from another insurer, it is called Re-Insurance.
Types of Fire Insurance Policy:
Fire Insurance policy may be of different types the same general issued fire insurance policies are discussed below-
- Valuation Policy: The policy in the case of which the insurer undertakes to pay an agreed amen of compensation irrespective of the market value of the subject matter of insurance, called valued policy. At the time of taking such policy an agreed value is decided for the insured property and if the property is damaged or destroyed by fire the insurer uses the agreed value as compensation to the insured person. This agreed value may be more or less than the market value of the insured property. This type of policy is issued that property whose market value can not be determined at the time of loss. Works art painting etc. are the subject matters of such policy
- Specific Policy: The policy in the case of which the insurer undertakes to pay compensation up to a specification amount irrespective of the actual value of the property, is called a specific policy.
- Average Policy: The insurance policy which contains an average clause, is called an Average Policy. In the case of under-insurance, the proportionate amount of compensation determined by applying the average clause.
- Floating Policy: When a businessman takes only one insurance policy for his entire goods lying in warehouses at different places, the policy is called Floating Policy.
- Replacement Policy: The insurance policy through which the insurer undertakes to pay
Replacement Policy. In the case of such a policy, the insurer generally does not pay
compensation in cash. Instead of it, he replaces the property lost.
- Comprehensive Policy: The policy which is taken to cover different types of risks like explosion, lightning, thunderbolt, rebellion, riot, civil strife, insurrection, etc. including the risk of fire, is called Comprehensive Policy. Such policy is not common in India.
- Loss of Profit Policy: When a fire accident takes place in a business, not only the stock of goods and property of the business are lost but there is a loss of profit because of the dislocation of the business. When a businessman takes an insurance policy to make up for such loss of profit, the policy is called the Loss of Profit Policy. Thus, it can be said that the policy which is taken to make up the loss of profit caused by dislocation of the business due to fire accident, is called Loss of Profit Policy.
The procedure of taking fire Insurance Policy :
The following procedures are required to be followed for taking a fire insurance policy-
- Expression of desire: The person intending to take a fire insurance policy has to express his desire to an insurance company.
- Filling up Application Form: The willing insured has to fill up the application form issued by the insurance company.
- Investigation of information: After receiving ‘filled-up application form from the in the application form. willing insured, the insurance company investigates the various matters mentioned of insurance is effective.
- Fixation of Premium: If the insurance company is satisfied after examining the matter of insurance and the possibility of a fire accident. application form, it fixes up the amount of premium on the basis of the value of the subject
- Payment of Premium: After receiving the notice for payment of premium, the intending insured deposits the premium with the insurance company,
Importance of Fire Insurance:
The remarkable points in the context of the importance of fire Insurance are-
- Contract of utmost good faith: Fire insurance is a contract of utmost good faith leisured must disclose all the material facts about the subject matter of insurance Similarly, the insurer must disclose all the terms and conditions of the policy.
- Insurable Interest: The insured must have an insurable interest in the subject rate or instance. The insurable interest must exist both at the time of insurance and a
- Contract of indemnification: Fire insurance is a contract of indemnification. This means that if the insured goods or property are lost or damaged due to fire, only then the inset is entitled to receive compensation; otherwise not.
- Prorimite cause: The compensation is payable to the insured only when the proximate course of loss or damage is fire.
- Duration of Contract: The fire insurance contract is valid generally for one year on a specific property or on a specific amount of loss of profit.
- Principle of Subrogation: According to this principle, after paying compensation, the right of the damaged property passes on to the insurer from the insured. That is to say, the insured can not get any benefit from the property being recovered.