Insurance

Features of Fire Insurance

Features of Fire Insurance

Fire has been a constant companion of man since the dawn of civilization. As the use of fire has helped in the development of civilization, there is no fire insurance to cover the financial loss of property damaged by fire.

What is fire insurance?

  • Generally speaking, the contract by which the insurer undertakes to pay a specified sum of money to the insured against a specified premium for loss caused by a fire within a specified period is called fire insurance.
  • According to R. S. Sharma, “A contract of fire insurance is a contract whereby one party in return undertakes to indemnify the other party in an amount specified in the contract if the contents thereof are damaged by fire or any other peril specified in the contract.”
  • M. N. According to M. N. Mishra, “The promise to pay compensation caused by fire is called fire insurance.”
  • Finally, the insurance that is taken to get financial compensation for fire damage is called fire insurance.

Features of Fire Insurance

Explaining the definitions of fire insurance reveals the following features of fire insurance:

  1. Fire insurance is a contract where there are two parties; (i) The insured and (ii) The insurance company.
  2. It is an indemnity agreement.
  3. The subject of the contract shall be property and people, but not crops or cattle.
  4. In order to get compensation, the loss due to fire must occur within the stipulated period.
  5. Reimbursement is the premium paid at the time of insurance.
  6. The amount of compensation shall be fixed equal to the loss or up to the specified limit as stated in the contract.
  7. The contents of the insurance must be determined. Here the definition of fire is different. In the context of fire insurance, fire is generally something that burns something. But that which produces only light or heat is not fire. Even if lightning or electricity produces heat or light, it will not be considered fire for the purposes of fire insurance. So if anything gets burnt due to lightning, it will not be covered by fire insurance.
Features of Fire Insurance
Features of Fire Insurance

Importance of fire insurance

  1. Capital Formation and Investment: Insurance companies through fire insurance collect a lot of money as premiums from various customers which helps in the country’s capital formation and invests the collected money in profitable development projects. As a result investment increases. This keeps the economy buoyant and contributes positively to the country’s growth.
  2. Contribution to Industry: Business assets are damaged through fire and electrical accidents, which can disrupt the flow of business. Fire insurance provides compensation for loss due to fire. As a result, the pace of business remains normal.
  3. Social welfare: Fire insurance covers individual and collective risk. In case of fire damage, the insurer mitigates the loss to the affected person or organization. Thus saving one from extreme financial distress. Such activities in turn benefit society. Such social welfare in turn has a positive impact on economic development.
  4. Employment Generation: Fire insurance companies are increasing day by day as the insurance business is profitable. As a result, new employment opportunities are created. As a result, fire insurance is contributing to solving the unemployment problem.
  5. Awareness raising: Fire insurance companies offer advice and incentives to reduce fire risk while taking fire insurance. Sometimes representatives of fire insurers visit the fire-insured property. As a result, people become more aware of fire damage and reduce fire risk.
  6. Complementary to other insurances: The amount of loss in fire insurance is versatile. Both vehicles and goods suffered extensive damage. The fire insurance system complements other insurances and further accelerates the economic growth of individuals, society, and the country. Because no insurance system alone can play a holistic role.

Finally, it can be said that as fire insurance protects the wealth of the country, it also creates capital and increases investment, activates and strengthens the wheels of business and trade, and plays a significant role in the economic development of the country.

Frequently asked questions

Generally speaking, the contract by which the insurer undertakes to pay a specified sum of money to the insured against a specified premium for loss caused by a fire within a specified period is called fire insurance.

Explaining the definitions of fire insurance reveals the following features of fire insurance:

  • Fire insurance is a contract where there are two parties; (i) The insured and (ii) The insurance company.

  • Capital Formation and Investment: Insurance companies through fire insurance collect a lot of money as premiums from various customers which helps in the country's capital formation and invests the collected money in profitable development projects. As a result investment increases. This keeps the economy buoyant and contributes positively to the country's growth.

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