Insurance

Fire insurance

Fire insurance

Fire insurance came into being to protect against fire damage. It is widely used insurance all over the world. Fire insurance is only one type of property insurance. It’s a deal. A 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.

S. 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.”

Types of fire insurance

1. Valued insurance

In the case of this type of insurance, the value of the subject matter is fixed in advance and if the subject matter is damaged, the insurer pays the insured amount equal to the said value. As the value is fixed in advance, there is no need to produce proof of asset value at the time of the insurance claim. Generally, such insurance is accepted for valuables, jewelry, and works of art. In this insurance, an insured is informed in advance about the amount of loss or the amount of claim. The premium rate is usually high in this type of insurance.

2. Undervalued Insurance

In the case of unvalued insurance, the amount of insurance claims depends on the market value of the damaged property. Therefore, the contents are not priced at the time of taking the insurance. It is then priced so that the principle of compensation can be fully applied.

3. Average insurance policy

If one insures for more or less than the market value of the asset, the compensation is pro rata. In this case, the compensation is determined according to the ratio of insured value and market value of the contents.

4. Specific insurance policy

In this type of insurance, the value of the property and assets insured is specified and is insured for a specific period of time. Irrespective of the amount of loss, in this case, the insurer will pay only a specified amount as compensation to the insured in case of loss of the insured property. Property valuation is not a problem, both parties can know the amount of compensation in advance. Such policies do not require the insured to accept the loss less the indemnity for deficiency insurance other than a total loss.

5. Floating Insurance

When the same owner takes out a single insurance policy for properties maintained at different locations, it is called a floating insurance policy. In this case, the insurer calculates the separate salami of the assets in different places and calculates the average of the total salami, and charges the total salami. This type of insurance is effective in case of an increase or decrease in stock. By ensuring perishable goods, the policyholder gets benefits. Figuring out the average premium is quite complicated. Here special conditions have to be added for some special products.

6. Additional insurance

This type of insurance is carried out on stored goods. Additional insurance is very useful for businesses whose inventory is subject to unspecified increases or decreases. In this case, the policyholder takes one insurance policy for the amount of stock he always has and another insurance policy for the excess stock.

7. Declared insurance

This insurance is also done on stocked goods. In this case, the maximum amount insured is insured against the value of stock and generally, 75% premium is paid initially. At regular intervals, usually, month-to-month inventory prices are declared and premiums are determined by averaging the total inventory at the end of the year. If the premium is less than the previously paid premium, refund the same amount. And if the premium is high, the additional premium has to be paid to the insurer. Generally, large manufacturers and traders who have a large inventory of goods that are variable, benefit from taking this type of insurance.

Fire insurance
Fire insurance
8. Adjustable insurance policy

In this type of policy, the policyholder first takes general insurance equal to the value of the stock, and later on any increase or decrease in the stock is covered. In the case of such insurance, the value insured shall be equal to the value of the goods actually stocked during the period of insurance. The provisional premium is fixed at this price and is paid only on acceptance of the policy. In case of an increase or decrease in stock, it should be declared. According to this announcement, the insurer increases and decreases the insurance premium. As the inventory increases and decreases, the insurance premium needs to increase and decrease and the premium is finalized at the end of the insurance contract term.

9. Restoration Insurance

In case of loss of property through such an insurance policy, the insurer undertakes to replace the property without paying any compensation for the same.

10. Consequential Damage Insurance

Taking out fire insurance along with another insurance policy is known as consequential loss insurance. In addition to the fire loss, the loss of profit due to loss of business due to loss of property is called consequential loss insurance. The significance of fire insurance is – Keeps the wheels of the industry moving, strengthens the financial base, achieves social welfare, creates awareness, and plays a complementary role to other insurances. The major fire insurance policies in use today are – a rated insurance policy, unrated insurance policy, average insurance policy, specific insurance policy, and floating insurance policy.

Frequently asked questions

Fire insurance came into being to protect against fire damage. It is widely used insurance all over the world. Fire insurance is only one type of property insurance. It's a deal. A 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.

  1. Valued insurance.
  2. Undervalued Insurance.

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  • Valued insurance,
  • Undervalued Insurance,
  • Average insurance policy

 

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