Fire insurance is designed to provide financial protection or property against loss or damage by fire and other specified perils. Basically it is a contract of indemnity. In this case the insured cannot claim anything more than the value of goods lost or damaged by fire or the amount insured whichever is less. Fire insurance is a contract to indemnify the insured for destruction of or damage to property or goods, caused by fire, during a specified period. The contract specifies the maximum amount, agreed to by the parties at the time of the contract, which the insured can claim in case of loss. This amount is not, however, the measure of the loss. The loss can be ascertained only after the fire has occurred. The insurer is liable to make good the actual amount of loss not exceeding the maximum amount fixed under the policy.
Fire insurance is a form of property insurance which protects people from the costs incurred by fires. When a structure is covered by fire insurance, the insurance policy will pay out in the event that the structure is damaged or destroyed by fire. Some standard property insurance policies include fire insurance in their coverage, while in other cases; fire insurance may need to be purchased separately.
Property owners should check with their insurance companies if they are not sure whether or not fire insurance is part of their policies, and if fire insurance is not included, it should be purchased.
Depending on the terms of the policy, fire insurance may pay out the actual value of the property after the fire, or it may pay out the replacement value. In a replacement value policy, the structure will be replaced in the event of a fire, whether it has depreciated or appreciated: in other words, if homeowners purchase a home and the value increases, as long as it is covered by a replacement value policy, the insurance company will replace it. An actual cash value policy covers the structure, less depreciation. Most accounts come with coverage limits which may need to be adjusted as property values rise and fall.
Fire insurance, provision against losses caused by fire, lightning, and the removal of property from premises endangered by ire. The insurer agrees, for a fee, to reimburse the insured in the event of such an occurrence. The standard policy limits coverage to the replacement cost of the property destroyed less a depreciation allowance. Indirect loss, such as that resulting from the interruption of business, are excluded but may be covered under a separate contract. Insurance rates are influenced by the quality of fire protection available where the building is located, the type of building construction, the kind of activity conducted within the building, and the degree to which the building is exposed to losses originating outside it.
Certain kinds of property, such as accounting records, currency, deeds, and securities, are frequently excluded from fire-insurance coverage or are declared uninsurable. Loss from such causes as war, invasion, insurrection, revolution, theft, and neglect by the insured are also customarily excluded. Coverage is suspended if the insured does anything that increases the hazard or if the property is vacant beyond a specified period. The policy may be canceled by either party for any reason, but the insurer must give the insured prior notice of cancellation. The policy may specify in addition that the insurer may replace or rebuild the damaged property rather than make cash settlement.
Fire insurance is an agreement between the insurer and the insured, under which the insurer agrees to indemnify the loss caused by lire, to the insured, in consideration of certain payment, called premium.
According to T.R Smith fire insurance may be defined as a contract whereby the insurers in return for a consideration, known as premium, undertakes to indemnify the insured against financial loss which may sustain, by reason of certain defined property, known as property insured, being damages or destroyed by fire or other perils within a stated period of liability of insurer, being limited to a specified amount called the sum insured.
Section 2 of the insurance act 1938 defines fire insurance as,” the business of effecting, otherwise than incidentally to some other class of insurance business, contract of insurance against loss by or incidental to fire or other occurrence customarily included among the risks insured against in fire insurance policies.”
Fire insurance is a device to compensate for the loss consequent upon destruction by fire. According to Halsbury it is a contract of insurance by which the insurer agrees for consideration to indemnify the assured up to a certain extent and subject to certain terms and conditions against loss or damage by lire, which may happen to the property of the assured during a specific period.
Thus, fire insurance is a contract whereby the person, seeking insurance protection, enters into a contract with the insurer to indemnify him against loss of property by or incidental to fire or lightning, explosion etc. This policy is designed to insure one’s property and other items from loss occurring due to complete or partial damage by fire.
In its strict sense, a fire insurance contract is one:
- Whose principle object is insurance against loss or damage Occasioned by fire.
- The extent of insurer’s liability being limited by the sum assured and not necessarily by the extent of loss or damage sustained by the insured: and
- The insurer having no interest in the safety or destruction of the insured property apart from the liability undertaken under the contract.
Features of fire insurance
- Fire insurance contract is a contract of indemnity. The insured cannot claim anything more than the value of the goods or properties lost or damaged by fire or the amount of policy whichever is less.
- . It should fulfill all essentialities required for a valid contract.
- It is a contract of utmost good faith in which the insurer and the insured must disclose all material facts related with the subject matter of the insurance.
- Fire insurance policy is issued for a lawful consideration.
- A fire policy is taken generally for one year and it can be renewed according to the terms of the policy.
- In fire insurance the insured must have insurable interest in the goods or properties insured against fire, both at the time of taking the policy and also at the time of incurring loss and the claim is filed for compensation.
- Fire policies cover loss against fire.
- We can assign the fire policy with the prior permission of the insurer.
- The scrap left after the fire, automatically passes in the hands of the insurer alter the payment of insurance claim.
- The cause of the tire is immaterial for admitting the fire insurance claim. At the same time if the fire is caused due to fraud or misconduct on the part of the insured, the loss will not be indemnified.
- On occurrence of fire, the insurer should be intimated immediately so that he could protect the remainder of the property and can also determine the amount of loss.
- The claim may be settled in cash or the goods or properties damaged are reinstated.
The standard Fire and Special perils policy
The perils specified in the policy are Fire, lightening. Aircraft damage, riots, strike and miscellaneous damages, storm, cyclone, typhoon, Tempest, Hurricane, Tornado and Flood and inundation.
These policies cover stocks at various specific locations under one sum insured. The insured may have stocks in two or more go downs. The insured is able to declare for insurance the total value of goods in all godowns but not separate values for each godown.
This is a fire policy in which the reinstatement value clause is attached. The clause provides that in the event of loss, the amount payable is the cost of reinstating property of same kind, by new property.
Industrial all risks policy This is a package cover designed for industrial risks (both manufacturing and storage facilities) with an overall sum assured of Rs 100 crores and above. The policy covers the following: Fire special perils, Burglary, Machinery breakdown and Business interruption