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fire-insuranceFire is one of the most common causes of damage to business-owned property.If we observe the kind of accidents / mishaps happening in warehouses / office buildings and houses, we found that fire was the key cause for the same. Fire due to short circuits is very common. Yet, in most cases, houses and properties are not insured against fire.
Fire insurance  is a contract where indemnification against the fire consequences is done by reimbursement of the damage either in installments or variable lump sums.
Generally, fire insurance agreement is valid for a period of one year and it can be extended from the policy holder’s side. Moreover, it can be terminated by either side if policy expiration deadline has passed.
There is a document called “Policy of Fire Insurance” related to the contract. When policy holder submits a claim against the fire hazard, insurance company hands over a document called “Cover Note” to the insured person after the claim acceptance. This cover note consists of an obligatory agreement for the time duration of the fire hazard occurrence.

Definition of fire insurance

Fire Insurance that offers protection of property against fire-related damages or destruction is called Fire Insurance.

Coverage offered by Fire Insurance

Fires can be very devastating because they create flames, smoke, and heat, any of which can damage buildings and their contents. Fire-fighting equipment’s like water, foams, and powders can also cause property damage.

  • Fire insurance offers complete protection against damages,due to fire explosion,caused to movable property.
  • Fire insurance includes damages to the properties including an office building,furniture,plan, stock, machinery etc.
  • Other than fire perils, this policy also includes damages due to natural disaster,landslide, explosion, bursting of water tank etc.

Types of Fire Insurance

Fire insurance policies are classified into into following types:

  • Valued Policy : Valued policy is a fire insurance policy where the value of property is fixed at the time of inception.  So in case of loss of property by fire, the insurer (insurance company) pays the insured the full of policy amount at the time of taking policy whether the property is fully damaged or not.
  • Valuable Policy : Under this policy the claim amount is to be determined at the market price of the damaged property.The loss amount is not calculated at the time of inception of risk but is determined at the time and place of loss.
  • Open or Unvalued Policy : In this policy, subject matter’s value is not mentioned in the policy guidelines. After the fire hazard, the lost value is determined by assessment and it is reimbursed to the policy holder. This policy is also known as open policy.
  • Average Policy :The policy in which losses born by both insurer and owner of insurance property. The formula of Average Policy  is:
    Claim= (insured amount / property value) * actual loss.
  • Specific Policy : Under this policy, if the damage is less than the policy amount, insurer compensates up to the amount damaged. If the damage is more than the insured amount insurer compensates only equal to insured amount or identify loss to the extent of specific amount.
  • Stock Declaration Policy : This policy suitable for covering the goods which can stand the value fluctuations all the way through the contract duration. This policy is made for the maximum value of stock to be insured. At the beginning of the contract, 3/4th of the premium payable is charged  in advance. Every month the policy owner is required to notify the value of present stock. If  any loss by fire, the compensation is made on the basis of declared value. At the end of the  period, based on the declared stock values , the total of premium payable is worked out as average.
  • Floating Policy : A single fire insurance policy which is conducted for different goods located at different places for supply to different markets that type of policy is called floating fire insurance policy. This policy is taken under one premium and one sum by the entrepreneur whose commodities are located at warehouses, stores and docks.
  • Standard Fire Policy : This policy refers to the indemnify of all the direct damages or losses caused by burning and lighting. There are supplementary coverage against hair flood, earthquake, cyclone, explosion and riot.
  • Profit Loss Policy :In case of any profit loss due to fire, then profit loss policy can cover the loss. It is also called as consequential loss policy.The profit loss policy includes the loss of tangible and intangible properties.
  • Schedule Policy : This policy refers to cover under collective terms like property details and their regarding premiums.A document that lists the property that is covered and not covered by an insurance policy.
  • Reinstatement Policy : Under this policy, the insurer pays compensation, which is sufficient to re-instate in a former position as before the loss.It is also called as Replacement Policy
  • Excess Policy : It is a subsidiary fire insurance policy, which is purchased to cover additional risks beyond the coverage of original first loss policy. This policy is purchased by such businessmen whose stock fluctuates from time to time. Therefore, policyholders need to take two policies as ordinary and excess policy. Ordinary policy is required for minimum stock value and excess policy is required for anticipated increase  stock value. Policyholders should a statement the actual stock value periodically.
  • Discounted Maximum Value Policy : Under this policy, no declaration or adjustment of policy is required, but this policy is required for covering the maximum risk amount.  This policy is not issued on all types of commodities and is confined only to selected commodities.

Benefits of Fire Insurance

Fire insurance can really help policyholders in recovering financially as well as emotionally. It can provide following benefits to the policyholders :

  • Replacement of Contents : Fire hazard causes irreparable damage to the lock, stock and barrels of the house / property. After successful acceptance of the claim, insurance holders get replacement reimbursement up to a pre-defined value of the business or household contents.
  • Provisional Housing : This type of insurance protects policyholders from the loss of home, business and other related possessions.
  • Rebuilding of the Damaged : Fire brings destroy to a building and it can lead to significant damage to the house or business structure. Under this insurance, policyholders provide coverage for the reinstatement or replacement or rebuilding of the damaged sections.
  • Preventive Measurements : Policy costs can be reduced by the usage of fire alarms, sprinkler systems  and other safety measurements  inside the home or business building.

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