A fire insurance policy is a form of agreement involving the insurance provider and the insured, in which the insurer promises to pay for any losses and damages brought on by the fire. Check out the article to learn more about the Fire insurance policy, how it works, its benefits and how to calculate a fire insurance claim.
What is Fire Insurance Policy?
A type of property protection that covers losses and damage brought on by fire is referred to as “fire insurance.”
The majority of plans include some kind of fire protection, however, in the event that their property is damaged or destroyed due to fire, residents may be able to acquire additional coverage.
The cost of replacing, rebuilding or repairing property above the highest specified by the fire insurance policy can be covered in part by purchasing supplementary fire coverage in the insurance plan.
What is the Purpose of Fire Insurance?
The fire insurance includes coverage for electrical fires, including those brought on by defective cabling and gas explosion, as well as those brought on by thunder and natural disasters.
The insurance plan can also provide coverage for a ruptured water tank or overflowing pipes.
- Fire Insurance plan protects policyholders’ houses and valuables, often known as insured property, from loss and/or damage.
- This is a catch-all phrase or kind of blanket that protects the home’s exterior and interior in addition to any possessions retained on the property.
- Injuries that occur while a person is on the property may also be covered by policies.
- If your home isn’t covered and you have a loan, there is a very significant risk that your bank won’t extend your loan.
It is a wise idea to protect oneself even if it is not required by considering fire insurance.
What Covers Under Fire Insurance Policy?
The following damages or losses are covered in a fire insurance policy,
- Existing loss of goods or products as a result of fire
- Increased living expenses as a result of personal property damage
- Loss to neighbouring buildings or property caused by a fire inside the insured housing complex
- Payout for firefighters
- The fire prompted by electricity
- Overflow of pipelines or water tanks
What are The Types of Fire Insurance Policies?
There are various fire insurance policies available to suit different kinds of needs.
Valued Policy
At the moment the policy is taken up, a value for the subject matter is decided upon.
If the specific is damaged or destroyed by fire, the company agrees to reimburse a specific sum. This policy is not subject to the indemnity principle.
The negotiated value could differ from the current market price of the loss by more or less. Typically, these insurance are offered for items or pieces of property whose price cannot be ascertained following loss or damage. These products could be jewellery, paintings, works of art, etc.
Floating Policy
To cover the danger of having goods laying about in various locations, floating insurance is purchased.
One insurance will handle the risk for all of these goods, and all goods must belong to a single person.
This strategy is beneficial to businesspeople who are involved in the export and import of commodities that are stored in various warehouses.
If particular policies had been taken out for each of these commodities, the premium that is levied is often the total of the premiums that would be paid.
These types of insurance always have an average clause.
Specific Policy
The risk is covered by this fire insurance policy for a certain amount.
If the property is lost, the provider will pay for the damage if it is lower than the agreed-upon sum.
For example, if you have taken insurance of Rs 40,000 and the property value is worth Rs. 90,000 and in the incident, you have cost damage of 30,000 then you will receive the whole amount.
If the loss exceeds the decided amount which is Rs 50,000, Only the insured amount will be covered by the indemnity i.e Rs. 40,000.
This policy does not penalise the insured for choosing a policy with a lower payout. The property’s true value is not factored in the decision.
Comprehensive Policy
You can purchase insurance to protect yourself from any hazards, including fire.
Risks like fire, explosion, lightning, burglary, rioting, labour disruptions, etc. may be covered by insurance. This is referred to as an all-risk or comprehensive policy.
Replacement Policy
The insurer pays compensation based on the property’s market value.
After accounting for the amount of loss, the compensation amount is determined.
According to a replacement policy, compensation will be given at the replacement cost.
The replacement asset must be comparable to the lost one.
In order to replace the lost asset without increasing the insured’s costs, the settlement amount will be determined by the market value of the new asset.
Consequential Damage Policy
Fire might disrupt production operations. While the fixed costs remain constant, production may decline. You can purchase insurance to cover consequential loss or profit loss.
The loss of sales is used as the basis for calculating the loss of earnings.
Additionally, a supplementary policy could be obtained for standing fees.
What is the Scope of Fire Insurance?
Both moveable and immovable properties are covered by the fire insurance policy’s coverage limits. It covers all properties that are on land but excludes those that are in motion.
Following is the scope of the fire insurance policy,
For the Building
- Both Under construction and completed Properties.
- Partitions, Electrical and Interiors.
For Accessories and equipment, Machinery and plants
- New Machinery
- Second-hand machinery
- Obsolete equipment
For Stocks
- Finished goods or products
- Raw materials
- In-process materials
- In trade undertaken by the retailer, manufacturer, or wholesaler
For Other Items Such as
- Furniture and fixers
- Piping, cables
- Tools, spares
- Household items, cheques, account books etc.
What are the Benefits of Fire Insurance?
You shouldn’t neglect and undervalue fire insurance when you take into account the sums the insurance provider can pay to cover the damages and shield you from additional issues.
Here are the benefits of fire insurance as follows,
- Homeowners are entitled to reimbursement for damages to the house’s structure.
- Additionally, it includes the expense of replacing household appliances like the air conditioner, television, computer, etc.
- The value of damaged merchandise can be covered by insurance in the event of a factory or office.
- If machinery is damaged, the cost of repairs is covered by insurance.
Who is Eligible for a Fire Insurance Policy?
- Any individual, group, institution, or company may require insurance to protect their operations in the event of a fire.
- Any person who owns a home, a structure, furniture, or other items.
- Shopkeepers or godown owners.
- Financial, educational, and research institutions, among others.
- Healthcare facilities, hoteliers, service providers, lodging, etc.
- Manufacturers, industrial companies, and transporters.
What is a Fire Insurance Claim?
The loss by fire claim must meet the following two requirements:
- The real loss must exist.
- The fire must be unintentional and accidental. This means that the insured property must sustain damage or burn damage. If the property is harmed by fire or smoke without an ignition, it will not be covered for damages under the term “fire,” and the insurer will not be held liable for such losses.
How to Calculate a Fire Insurance Claim?
The Fire insurance claim can be calculated as follow,
Add-on Coverage Under Fire Insurance Policy
- Earthquake
- Wreckage removal
- Forest fire
- Startup cost
- Cover for molten metal
- Stock damage brought on by a temperature shift.
- Alternate accommodation
- Unconstrained burning
What is Excluded from the Fire Insurance Policy?
Following incidents or situations is the exclusion of Fire insurance policy,
- Willful behaviour or severe negligence
- the hazards of forest fire, war, and nuclear power
- Unless particularly stated, unspecified precious stones, checks, money, paperwork, etc.
- Terrorism
- fire underground
- theft-related losses after or during the fire
- Human-made reasons for the fire that are malicious or unfriendly
FAQs
| What is not covered under fire insurance?
Exclusions in an Indian Fire Insurance Policy, any damage or loss to electrical equipment, including short circuits, equipment failure, power leaks, etc. |
| What is a risk in insurance?
Risk is the possibility that something negative or unexpected will occur in the context of insurance. This could result in the destruction, loss, or theft of priceless items, as well as loss or harm to people. |
| What is the purpose of a fire insurance claim?
A fire insurance plan is a sort of property insurance that covers losses and damages brought on by fire to a home or business. This policy permits the policyholder to seek reimbursement for the costs associated with repairing, replacing, or repurposing a property that has been damaged by fire. |
| Who do we need fire insurance?
Protection from unforeseen fire and other peril-related loss or damage of moveable or immovable property is provided by fire insurance. Any individual or business can opt for a fire insurance policy for protection. |
