Fire Insurance and its Types
by Nandini Singh
Fire insurance can be described as a kind of an insurance which would cover almost any kind of damages and losses that are caused by fire. The Fire Insurance mainly helps to cover the loss of property at risk of fire that may be caused accidentally or unintentionally. A fire insurance policy usually covers the loss caused by fire involving the destruction of or damage to property or goods. It involves a specified period and an agreed upon amount. The policy also specifies the maximum amount, which, in case of any loss, can be claimed. This amount is not the measure of the loss. The loss can be analyzed only post the fire incident. For claiming the insurance, the insurer has to make the payment for the actual amount of loss which should not exceed the maximum amount fixed under the policy. Fire insurance is actually property insurance which is helpful in covering damages and losses which may be caused by fire. The purchase of fire insurance would help to cover the cost of replacement, repair, and/or reconstruction of property, all of which would be above the limit set by the property insurance policy. Fire insurance policies typically contain general exclusions, such as war, nuclear risks, and similar perils.
Valued policy is one of the many types of fire insurance. In this type of policy an agreement is set between two or more parties, and the insurer, being one party to the agreement, will be liable pay in case of any kind of destruction of property caused by the fire.
Specific policy is another type of fire insurance, where the value of property is not considered for
the purpose of insurance and the insurer pays the loss amount, which however, is not more than the sum specified in the policy. It ensures a risk for a particular amount.
Average policy is a fire insurance policy in which the value of the property is considered. This policy is only insured for a sum smaller than the actual value of the property. In this policy type, the insurer will have to bear only the proportion of the actual loss which, at the time of loss, the sum assured bears to the actual value of the property.
Floating policy would include the coverage for one amount and one premium of several types of goods which may be lying at various locations for. The premium which is usually charged under this kind of policy is the total average of the premiums that could have been paid had each batch of the goods would have been insured under the specific sums of the specific policy for specific sums.
Excess policy is when the stock of the insured is fluctuating and the insured can take a policy for an amount that is only below the amount usually under which their stocks don’t necessarily fall. In this case, another insurance policy might have to be taken up by the insured to cover the maximum amount of stocks which. The former type of policy is called First Loss Policy and the latter is called Excess Policy.
A Blanket policy is the type of insurance policy which, under one policy, covers all assets, whether fixed and/or current.
A Comprehensive insurance policy is the one which takes into account coverage for risks related to fire, flood, riots, strikes, burglary etc, which may be restricted a particular specified amount.
Consequential Loss Policy has this main objective to assure cover for the loss or profit that would be caused by any interruption of business due to fire. It is also known as loss of profit policy.
Reinstatement Policy, as the name suggests, is a policy under which the insurer pays the amount which is sufficient enough to reinstate assets or property that has been destroyed.
Open Declaration Policy is a policy where the value of the subject is declared while the insured makes a deposit with the insurer. Such risks are covered within the insurance. It also may be noted that policies of this kind are normally taken up in the situations which involves a variable value of the stocks in hand.