Fire insurance is an essential contract under which the insurer, in return for a consideration (premium), agrees to cover the insured for the financial loss which the latter may suffer due to destruction of or damage to property or goods, caused by fire, during a specified time. The fire insurance policy offers protection against any unanticipated loss or damage to/destruction of property due to fire or other perils covered under this policy. The different types of property that could be covered under a fire insurance policy are dwellings, offices, shops, places of worship etc and their contents; industrial/manufacturing risks and contents such as machinery, plants, equipment; goods including raw material, goods, packing materials etc in factories and so on.
What is Fire insurance?
The type of insurance that provides coverage against property damages caused due to fire is fire insurance. Unlike property insurance, fire insurance covers the expenses incurred for the reconstruction, replacement and repair of not only the insured property, but also the nearby structures. It also covers damage caused to personal properties other than insured’s that have been affected due to fire. Added to that, it also covers the expenses for people whose life or livelihood is affected due to property damage.
In India, fire insurance policy is governed by All India Fire tariff that has been issued by a statutory body-Tariff Advisory Committee. According to the standard policy of fire and special perils policy, all the movable and immovable properties on land can be insured. Various types of properties can be insured under this policy, like shops, shopping malls, clinics, hospitals, apartments, industrial buildings, equipments, private houses, places of worship and so on.
Fire insurance: what is covered?
Under fire and other perils policy, several things are covered apart from fire damage. Expenses incurred due to damage by explosion/implosion, lightning, Typhoon, Storm, Tornado, Hurricane, Flood, riot, malicious damage, strike, inundation, bush Fire, impact damage is also covered. Additionally, loss incurred due to leakage from automatic sprinkler installation, subsidence and landslide including Rock slide, missile testing operations, etc. are also covered. However, it entirely depends on your budget and requirements as how much you can and willing to invest on paying the premium on a standard fire and other perils policy. Many a times, damages caused by earthquake is also covered under this policy if the policy seeker is willing to pay a little extra as premium.
Fire insurance: what is not covered?
There are certain major exclusions under this fire insurance policy, which is also called –“excess”. Loss or damage of property due to nuclear perils, electrical/mechanical breakdown, pollution or contamination, burglary and housebreaking, terrorist act, war and warlike operations and so on are not included in the insurance.
Few tips for effective claim settlements-
• Make sure you know the total value of your property so that if there is any mishap, you can easily calculate and mention your loss during claim settlement.
• List down the items along with their average value and declare it beforehand while insuring.
• Urgently inform your damage or loss of property to the insurance company so that the surveyor can be appointed to cut down the loss.
• Provide accurate details of all the valuable items and state the exact place and date of their loss.
• Co-operate with the insurers and surveyors in their search and information gathering process.
What is needed to apply for a fire insurance policy?
Generally, there are no set rules that can determine the eligibility of the insured. However, there are some obvious conditions that determine the eligibility. They are-
As per its principles under common law, it ensures that the insured must not recover more than his/her actual loss. The principle of indemnity is based on salvage, policy excess, depreciation of value, under-insurance and so on.
Utmost good faith-
It is essential for the insured to disclose all the details and facts related to property. Generally, insurers or insurance providing companies rely on the facts and details provided by the proposer.
Subject matter of the insurance-
There should be a specific subject matter on which the insurance policy can take place. It is also important to describe the incident and items lost in details so that the need of reimbursement can be established.
Insurable interest/ Legal right of insure-
There are three pre-requisites required to constitute legal right of insure, they are- a) A physical object that is destructible
b) That physical object should be subject matter of insurancec) The insured should own it or have some kind of relationship
with the object/objects that can be legally established.
Fire insurance: add on covers
Generally, fire and other perils insurance policy provide basic coverage to the insured. However, there is always a scope of increasing the coverage limit by paying extra premium. Add-on covers can be consulting engineers, architects or surveyor's fees, damage from spontaneous combustion, loss of rent, removal of debris, leakage and contamination cover and so on.
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