Fire Insurance Policy: Benefits & Features

Fire Insurance Policy: Benefits & Features

One of the oldest forms of home or property insurance is the fire insurance policy. It is a type of insurance policy in which the insurer compensates the losses faced by the policyholder in the event of a fire breakout. The compensating amount is the losses that are mentioned in the policy. The losses covered are up to a specific amount and for an agreed period of time. If the accident occurs after the expiration of the policy, the owner does not have any right to claim for the sum assured.

Before buying any policy, the insured should be pretty sure about the insurer or the insurance company. It is important to know about the core features and benefits before choosing any policy. What points are covered in the policy or what would not be included should be considered properly.

Basic features of fire insurance policy one should know

  • Insurable interest

The insured should have an insurable interest related to the property for which he is buying the insurance policy. Insurable interest means the policyholder should have profitable benefits on possessing the property and he is ready to bear the loss during uncertain situations. Insurable interest should exist both at the time of purchasing the policy and while filing a claim for the losses.

  • Utmost good faith

Any fire insurance contract is signed on the basis of the utmost good faith principle. In other words, policyholder or the insured should provide complete information regarding the subject matter of insurance contract. Disclosure of vital points is necessary as an insurer might calculate the risks involved. Every information pertaining to the environment, surrounding, construction of the property should be mentioned clearly.

  • An indemnity contract

Contract of indemnity means the insurer is liable to pay up to the insured losses. In case there is no loss due to fire, no claim is applicable. For example: if the total loss is up to INR 5 Lakhs and the insured limit is up to INR 2 Lakh, then the insurer is liable to pay only 2 lakh rather 5 Lakh.

  • Fire insurance coverage

Fire insurance covers the damage caused due to fire from any sources. Sources of fire breakout can be due to electricity related fault, an explosion of gas pipes, or any natural disaster. There is even coverage limit on some sources. The insurer can reimburse on the basis of replacement cost or actual cash value. Hence, it can be a partial or full coverage policy depending upon the type you choose.

Key benefits of choosing any fire insurance policy

Compensation of the losses: Any property that catches fire is hardly repaired as most of it turns into ashes. Replacement is the only sensible method in such a case. While taking a particular fire insurance policy, one can get the decor items easily replaced. After the accident takes place, you should immediately make a claim and get your losses covered.

Rebuilding the damaged property: Fire brings utmost destruction to the property and leads to huge damages. However, it can be compensated if you take a fire insurance policy. Policyholder gets replacement coverage against the damaged property. Well, it is essential to know what all parts of the property are included in the policy.

Provisional housing: Fire insurance policy greatly helps the policyholder from losing business or homes or other related possessions due to fire accidents. Provisional housing refers to the rental amount that is borne by the insurance company where the policyholder lives until the property and its structure is repaired.

Different types of fire insurance policy one should know

Valued and unvalued policy: A valued policy is the policy in which the agreed value of the subject matter is clearly mentioned in the policy contract. Hence, at the time of claiming, the admitted amount is paid rather the actual losses. On the other hand, an unvalued policy does not include the agreed amount of the subject matter. It is often regarded as an open policy.

Average and specific policy: In average policy, insurer reimburses the percentage of total loss. In a specific policy, there is a definite sum and there is no particular consideration of the value of the subject matter. Hence, reimbursement is done on the basis of the definite sum mentioned.

Stock declaration policy: Such a policy covers those goods whose value might fluctuate during the contract duration. In this case, three-fourths of the premium is paid by the policyholder and the final premium is calculated as per average stock at the end of each year.

Whether it is a business or private property, fire insurance would definitely help you cope with the losses incurred due to fire accidents. Analyse the type of policy and accordingly invest as per the nature and features of the property to be insured.

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