Property insurance covers loss in the event that damage, injury, or death occurs and the person who owns the property that caused or was involved in the event is liable for the cost of the loss. Today this type of insurance is usually bundled with liability, or casualty, coverage, which insures the loss incurred by a third party that is caused by the property or property owner. Property insurance is also a contract of indemnity whereby the insurer in consideration of a certain periodical payment undertakes to indemnify the other party against financial loss which the later may sustain by reasons of certain subject matter being damaged or destroyed by the risks or reasons affecting adversely up to an agreed amount. The property is the subject matter in property insurance. Property insurance provides protection against most risks to property, such as fire, theft and some weather damage. This includes specialized forms of insurance such as fire insurance, flood insurance, earthquake insurance, home insurance or boiler insurance. Property is insured in two main ways open perils and named perils. Open perils cover all the causes of loss not specifically excluded in the policy. Common exclusions on open peril policies include damage resulting from earthquakes, floods, nuclear incidents, acts of terrorism and war. Named perils require the actual cause of loss to be listed in the policy for insurance to be provided. The more common named perils include such damage-causing events as fire, lightning, explosion and theft.
The following are the main forms of property insurance.
- Marine insurance
- Fire insurance
- Miscellaneous insurance: Under this type of insurance we can insure property, machine, goods, automobile, furniture etc. against the damage or destruction due to accident or disappearance due to theft.
Marine insurance is the oldest form of Insurance. It is closely related to import and export trade overseas. It is an insurance against the perils of the sea which are likely to occur during sea transport. Marine risks generally related to the ship or cargo and the traders and owners of the ship always like to ensure the safe arrival of the ships and cargo. Marine insurance covers a lot of risks such as sinking, burning of ships, accident, collision of ships, jettison, barratry, piracy, explosion, sea dacoits, stormy winds causing losses to the ship and cargo and many other perils of the sea. Marine insurance covers the loss or damage of ships, cargo, terminals, and any transport or cargo by which property is transferred, acquired, or held between the points of origin and final destination. Marine insurance is a type of insurance that covers boats and ships, as well as their cargo and in some instances the places where the boat or ship is docked.t has a colorful history, beginning informally in England during the 17th century. In 1906, the Marine Insurance Act was passed under British law, creating a standard operating procedure for policies that dictates the world’s policies to this day. The standards set forth by the act are considered reasonable, but due to changes in technology and social standards, the act is generally seen as obsolete and is being replaced by more modern legislature.
According to section 2(13) A of the Insurance Act 1938 a marine insurance defined as the following. “Marine insurance business means the business of effecting contracts of insurance upon vessels of any description, including cargos, freights and other interests which may be legally insured in or in relation to such vessels, cargoes, freights goods, wares, merchandise and property of whatever description insured for any transit by land or water or both, and whether or not including warehouse risks or similar risks in addition or as accidental to such transit and includes any other risks customarily included among the risks insured against in marine insurance policies.”
According to Arnold marine insurance is a contract whereby one party for an agreed consideration, undertakes to indemnify the other against loss arising from certain perils and sea risks to which a shipment and other interest in a marine adventure may be exposed during a certain voyage or a certain time.
Subject matter of marine insurance
Marine hull insurance, cargo, freight and liability are the subject matter of marine insurance.
Marine Hull Insurance:
This pertains to insurance of ocean going steamers and other vessels. “Hull” refers to the body or frame of the ship. Machinery is the equipment that generates the power to move the vessel and control the lighting and temperature system such as boiler, engine, cooler and electricity generator. Hull insurance provides the cover for the hull and machinery as well as in respect of materials and outfit and stores and provisions for the officers and crew. In addition cover for liabilities is included.
Marine Cargo Insurance:
This being cargo insurance, it provides cover for various transit perils in respect of goods and or merchandise in transit from one place to another by sea, air, road or registered post. Transit or Marine risks or perils are covered under Marine Insurance. Marine insurance plays a pivotal role in Import, Export and internal trade. Trade involves movement of goods from one place to another place. Goods while in transit are liable to be lost or damaged through one or other of various perils from the time it leaves the warehouse of the supplier till it is received at the final warehouse of the consignee. Goods while in transit are generally exposure of perils leading to total loss or damage. The loss or damage suffered due to these perils is to be transferred to the Insurer in lieu of the premium, as these are included in the Marine cover. It has coverage of loss or damage caused by war, civil war, revolution, rebellion, insurrection or civil strife or any hostile act, capture, seizure, arrest, restraint detainment, general average and salvage charges Strikes, riots etc.
Freight is the charge payable for the carriage of cargoes. If the vessel is a chartered one, the money is to be paid for the use of the vessel. In case the cargo or ship gets destroyed, the shipping company will also lose the freight on the carriage of cargo. If the cargo owner pays freight for the goods shipped at the time of shipment and the goods do not reach the destination, he loses the fright. The policy covers such risk is called freight insurance.
Features of marine insurance
The following are the important features of marine insurance contract.
- In this type of insurance cargo, ship and fright is to be insured.
- There is a contract between insurer and insured.
- The insured is liable to pay a certain amount to the insurer as premium for the insurance.
- Insurance can be taken for a single journey or number of journeys during a period of time.
- The insurer guarantees to indemnity the loss incurred by the insured from sea perils.
- .Marine insurance can be taken against losses incurred in inland also.
- It also includes third party insurance.
KINDS OF MARINE POLICIES
The document containing the terms and conditions of the contract is called the Marine Policy. It must contain the names of the assured and the insurer or insurers. The subject-matter insured and the risk covered the voyage or period of time or both and the sums insured. It must be duly signed by the insurer and stamped under the Stamp Act. 1899. The Marine Insurance Act deals with the following types of policies:
When the contract is to insure the subject matter at and from one place to another, the policy is called a “Voyage policy”. In this case the risk attaches only when the ship starts on the voyage.
Where the subject-matter is insured for a definite period of time, it is called a “Time Policy. The ship may pursue any course it likes; the policy would cover all the risks from perils of the sea for the stated period of time. A time policy cannot be for period exceeding one year, but it may contain a continuation clause.
It is a combination of voyage and time policies and covers the risk during particular voyage for a specified period of time.
It is a policy, which specifies the agreed value of the subject matter insured. If there is no fraud or misrepresentation, the value in a valued policy is conclusive as between the insurer and the insured, whether the loss is partial or total.
Open or Un-valued Policy
In this policy the value of the subject-matter insured is not specified. Subject to the limit of the sum assured, it leaves the value of the loss to be subsequently ascertained.
The practice of taking out floating policies has come in vogue because of the difficulty of knowing by which ship or ships the goods are to be shipped. Such a policy therefore only mentions the amount for which the insurance is taken out and leaves the name of the ship(s) and other particulars to be defined by subsequent declarations.
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