Meaning:
Fire insurance is a special type of insurance which insures and compensates for damages and losses caused by accidents of fire.
Fire insurance assists to protect and compensate the risk of loss of property which may be caused by fire accidentally or unintentionally.
It covers the loss that the insurer is likely to suffer due to damage or injury to property or goods, caused by incidents of fire during the certain period and up to a specific amount.
The fire insurance policy shall specify the maximum amount which can be claimed by the person insured in case of loss. However, it must be noted that this amount is not a measure of the damage caused by the fire as the damage caused can only be analyzed after the incident of fire has taken place.
Hence, the insurer shall pay the amount which is proportionate to the damage caused by the fire incident not exceeding the maximum amount specified in the fire insurance policy.
Types of Fire Insurance Policies:
- Valued Policy
- Specific Policy
- Average Policy
- Floating Policy
- Excess Policy
- Blanket Policy
- Comprehensive Policy
- Consequential Loss Policy
- Reinstatement Policy
- Open Declaration Policy
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Valued Policy
This is a type of fire insurance policy in which the insured person and the insurer enter into an agreement by which the insurer agrees to compensate in the situation when the property or goods are destroyed or damaged by a fire incident.
2. Specific Policy
This is a type of fire insurance policy in which the insured person and the insurer enter into an agreement by which the insurer agrees to compensate a specific amount i.e. risk of damage of goods in case of a fire incident.
In this is a type of fire insurance policy in case of an incidence of fire, the insurer is bound to pay all the loss or damage caused by the fire incident provided it does not exceed the specific amount specified and agreed by the insurer and the insured person in the fire policy.
Hence, in this is a type of fire insurance policy the value or worth of the property is not taken into consideration.
3. Average Policy
This is a type of fire insurance policy in which the insured person and the insurer enter into an agreement by which the insurer agrees to compensate a specific amount lower than the value of the property so insured.
The insurer in this type of fire insurance policy is bound to compensate only the amount which is specified in the insurance agreement and nothing more than it.
4. Floating policy
This is a type of fire insurance policy which compensated many types of goods or property existing at different location for a specific amount and a sine premium.
The premium charged under this policy is calculated as the average premium that would be charged in the instance that each class of goods or property would have been insured under the insurance policy of specific amounts.
5. Excess Policy
This is a type of fire insurance policy which is based upon the stock or market value of goods. In this type of fire insurance policy, the insured person can procure a policy for a price below the one in which the stocks do not come under. This can be only done if the stocks of the insured person have the likelihood of fluctuation.
In this type of fire insurance policy, the insured person shall also be liable to enter into agreement with another insurance policy to compensate the excess amount of stocks which might be attained at certain time frames.
6. Blanket Policy
This is a type of fire insurance policy which compensates for all goods, property and other related assets which may be fixed as well as present at that point of time under a single fire insurance policy.
7. Comprehensive Policy
This is a type of fire insurance policy which compensates risks of not only fire but also risks of flood, riot, strikes, theft etc. extending up to a certain fixed amount which may be agreed upon by the insured person and the insurer in the terms of the insurance policy.
8. Consequential Loss Policy
This is a type of fire insurance policy which indemnifies the insured person against the risk of loss or profit triggered by the destruction or disturbance in the regular course of business or trade of the insured person due to the incidents of fire.
This is a type of fire insurance policy is also called as Loss of profit policy.
9. Reinstatement Policy
This is a type of fire insurance policy in which the insurer compensates the sum adequate to reimburse or restore goods and property damaged due to the fire incident.
10. Open Declaration Policy
This is a type of fire insurance policy in which the insured person deposits a specific amount with the insurer and specifies the value of the goods or products so insured. Hence, the risk of damage to the goods or property insured is covered.
This type of fire insurance policies are normally opted by persons who deal with stocks which are very volatile and fluctuate frequently.
SUMMARY
A fire insurance policy insures a person of the incidents of fire which can cause damage to the property or goods of the insured person. It assists to compensate for the loss up to a specific amount agreed upon by the insured person and the insurer.
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