Definition and Meaning of Fire Insurance

Definition and Meaning of Fire Insurance

Sharing About Definition and Meaning of Fire insurance

Fire insurance Policy is basically a legal contract under which the insurer offers the insurance coverage to the insured member for any financial loss caused by fire during the period of coverage. This financial loss may result due to damage to goods or property. Insurer agrees to offers protection in return to the premium paid by insured. Definition and Meaning of Fire Insurance

Definition and Meaning of Fire Insurance

The term ‘fire’ used in fire insurance terminology is the fire which is out of control. Thus, ‘Fire’ which is confined within its defined limits and used for domestic or manufacturing reasons, is not used here. As per the terms and conditions of fire insurance policy, ‘Fire’ is defined as the product resulting from combustion or burning. Thus, fire that leads to losses to property or goods must result from ignition procedure.

Features

· The fire insurance policy specifies the maximum amount that can be claimed by the insured member in the event of loss due to fire. However, the extent of loss occurred due to fire can be determined only after the fire incident. Thus, this claim amount does not define the extent of loss.

· It is the liability of the insurer to ensure that the actual amount of loss should not exceedthe maximum amount fixed at a time of selling the policy.

· Insured person can extend the Fire policies further by paying additional premium for including the collateral damages such as loss of income. Insured person have insurable interest in the property so he/she needs to take permission from the insurer for assigning the fire insurance policy.

· A person who has partial interest in a property or goods can buy fire insurance for providing coveragefor his interest and interest of others as well. Those persons who have insurable interest in property or goods under fire insurance includes Owner, Mortgagee, Official receiver, Warehouse keeper, commission agent, etc.

Types of losses covered

A fire insurance policy clearly defines the type of losses covered under fire insurance. The common types of losses covered are mentioned below

· Damage to the property or goods due to usage of water for extinguishing fire

· Damage to the property or goods caused by fire brigade for preventing the progress of flame

· Damage to the goods caused during the procedure of their removal from the building caught in fire.

· Expenses paid to fire brigade workersinvolved in extinguishing fire.

Types of losses not covered

A fire policy does not cover following types of losses

· Loss due to fire caused byearthquake, military rising, invasion, rebellion, riots, civil strife, mutiny, act of foreign enemy, martial law, war, etc.

· Loss caused by burning of property under government order

· Loss caused by theft during or after the occurrence of fire

· Loss or damage to property caused by spontaneous combustion due to defects

· Loss or damage by lightening or explosion without occurrence of actual ignition

· Loss caused by underground fire

Salient Features of a Fire Insurance Contract

Unforeseen calamities are increasing in the 21st century. The victims, who are normally unprepared for the catastrophe, get completely shattered after the catastrophe. Hence, it has become a regular feature among individuals and organizations to safeguard themselves against various events of calamities or sudden problems, such as fire, theft, ill-health, etc.

Taking insurance policies is a common measure adopted to deal with such events. One such policy known as fire insurance is taken to minimize the individual financial loss due to destruction of goods and property due to fire.

Fire insurance is a contract between two parties, the insurer and the insured. The insurer refers to the insurance company and the insured refers to the person taking the insurance policy. As per the contract, the insurer for an agreed amount (consideration) indemnifies the insured for the financial loss caused due to fire. At the same time, it is the duty of the insured to take all possible measures to save goods from destruction at the time of mishappening. He should not be careless and laid back thinking that he can claim his loss from the company.

Moreover, the insured will be compensated for the amount equal to the value of the loss. This is to ensure that the insured cannot make any profit out of the situation. The property or goods against which the compensation is paid will be taken by the company. Any profit made from the sale of destroyed goods belongs to the company and not to the insured.

Another important point is that to claim insurance money, the immediate cause of destruction should be fire only. That is, the loss must be caused by fire flames and not merely due to rising temperature. Even in a genuine case of fire, the company takes all possible measures to ensure that the fire was accidental and not deliberate. Only then, it begins with the claim proceedings.

The insured party can also enter into co-insurance to spread the consideration between different insurance companies. In such cases, all the companies will proportionately share the amount of loss in a manner that the consideration should not exceed the actual loss. Such contracts are ideal for large manufacturing organizations who take the policy of a very large amount.

In a contract of insurance, it is the moral duty of the insured to disclose all material facts that can affect the provisions of the contract.

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