Fire Insurance

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What is Fire Insurance?

Fire Insurance is a type of property insurance that covers the loss of property insured by fire. It is a legal contract between the policyholder and an insurance company.

Why is it important?

Fire accidents are unexpected and destructive. It not only shakes your finances but also becomes more challenging to deal with the aftermath. In addition, it can bring a flourishing business to a stalemate if the property damaged is not insured.

Fire Insurance

 

Advantages of taking fire insurance:-

  1. Provides comprehensive protection against damage caused due to fire explosion.
  2. In some cases, it gives death benefits to the employee’s family if he dies in a fire accident.
  3. Provides replacement cost, which helps a homeowner to buy a similar article.
  4. Includes replacement and repair cost of machines in case damaged due to fire.

Types of fire insurance in India

In India, five types of fire insurance can be availed by the premise/person according to their necessities.

  • Specific policy:- This type of insurance policy insures a risk of a certain amount. The insurer pays all the loss provided, which is no more than the sum specified in the policy.
  • Comprehensive policy:- A Fire Insurance Policy includes/ covers risks such as fire, floods, riots, strikes, burglary etc. Up to a certain amount is known as comprehensive policy.
  • Valued policy:- A contract is framed in this fire insurance policy, and the insurer agrees to pay in the event of property destruction by fire.
  • Floating policy:- In this type of fire insurance policy, the policy covers various kinds of goods lying at various locations for one amount and one premium.
  • Consequential loss policy:- The objective of this type of policy is to indemnify the insured against the loss or profit caused by business interruption due to fire.

Characteristics of fire insurance

  • Covenant of good faith:- A fire insurance contract is governed by the principle of utmost good faith, which says that the policyholder must disclose all the essential points regarding the subject matter of the insurance policy.
  • Covenant of indemnity:- The insurer has to set up a claim only to the insured limit. In case there is no damages or loss, no claim is applicable.
  • Insurable interest:- This policy is not valid if the insurer has an insurable interest in the insured property.
  • Direct loss:- If the root cause of the loss/ damage is not fire. No claim is applicable.
  • Personal rights:- In case of any loss/damage because of any unfortunate circumstances, the insured amount will be allotted to the one whose name is mentioned in the policy.
  • Personal insurance contrast:- As this insurance is a private contract. The insurance company must have complete knowledge about the behaviour of the policyholder.

Inclusion under Fire Insurance in India

It covers a wide range of perils and is often termed as common fire and special perils policy.

Fire Insurance Perils Inclusion
Fire The policy provides coverage for any damage caused due to fire. 

Note:- It does not include damage caused due to natural heating, own fermentation, or unconstrained burning.

Lightning If any damage occurs due to lightning, it will be covered. E.g.:- Crack in the Roof/ building area. etc.
Explosion Loss caused by fire explosion is covered.
Aircraft damage Suppose any damage or loss happens due to an aircraft. For instance, articles dropped by an aircraft, airborne devices etc. Will be covered in this policy.
Terrorist Activity,Riots/ Strike Damage due to riots, strike, or any fear monger is secured by fire insurance.
Natural Calamity Any harm to the property due to natural calamity such as tycoon, Strom, etc. Is covered under this policy.
Landslide/Rockslide The destruction caused due to landslides and rockslides is covered.
Bursting/ overflowing of water tank Damage caused due to bursting/overflowing of water tank is covered under this policy.
Bush Fire Fire set to overgrown bushes/plants may sometimes end up damaging the property. Is covered under this policy.

Note:- Forest fire is not covered under this policy.

Exclusion under fire insurance in India

Exclusions include:-

  • Damage due to nuclear perils, radioactivity, or nuclear waste.
  • Loss directly or indirectly due to theft is not covered under this policy.
  • The policy does not cover loss/ damage due to war, invasion, civil war, or terrorist activities.
  • No cover for damage or loss due to changes in temperature or due to natural disasters.
  • No coverage is provided for loss of earning, loss of delay or market loss, consequential loss.

Eligibility criteria to buy a fire insurance policy

  • Any person/organization/institution/firm may need to ensure their business from an unforeseen misfortune in case of a fire.
  • Anyone who possesses a building, furniture, household articles etc.
  • Retailers or godown keepers.
  • Banks, financial, education, research institutes etc.
  • Medical clinics, hotel owners, service suppliers, lodging, clinics etc.
  • Manufacturing and industrial firms, transporters.

Documents required to file a fire insurance claim

  • A copy of policy authorized; including the schedule and clause
  • The complete duly filled claim form.
  • Newspaper proof if the incident is published.
  • If any records of previous claims.
  • Photographs.
  • Report by the fire brigade.
  • A copy of the final investigation report.
  • Forensic report.

Add on coverage in fire insurance.

Upon payment of an additional premium, the insured may take benefits of the following add on coverage:

  • Earthquake
  • Forest fire
  • Wreckage removal
  • Loss of rent
  • Startup cost
  • Alternate accommodation
  • Unconstrained burning
  • Damage to stock due to change in temperature.
  • Cover for molten metal spillage
  • Impact loss owing to insured’s own rail/road transit

Selecting sum insured for fire insurance

Selecting the sum to be insured is one of the most important decisions while taking an insurance policy.

The following things should be kept in mind while deciding the sum to be insured for a fire insurance policy:-

  • Building
  • Stock
  • Valuable precious metals and materials, antiques etc.
  • Plan and machinery, furniture or other important personal assets.

Tips for filing a fire insurance claim

  •  The first thing to be done if any mishap happens is to inform the insurer at the earliest.
  • Furnish a precise amount of damaged property/goods.
  • Co-operate with the surveyors if they need any assistance or additional information from you.
  • Help the surveyors in every manner possible.

FAQ’S on Fire Insurance

What are the Risks Covered Under a Fire Insurance Policy?

Fire insurance covers mishaps caused by unintentional fire, lightning, implosion, or explosion, among other things. Artificial hazards include the bursting or overflowing of water tanks and pipelines, leakages from water sprinklers, and so on.

What does insurance pay if your house burns down?

The standard homeowner’s insurance policy will cover the cost of damages if your home is destroyed by fire. Ensure that you report the loss as soon as possible.

Can I insure my house for more than it is worth?

Many homeowners can choose an extended replacement cost policy, which pays more than the market value of their homes that need to be rebuilt. This comprehensive policy is ideal for people whose homes have unique features or are built with nonstandard materials.
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