FIRE INSURANCE POLICY AND ITS TYPES

FIRE INSURANCE POLICY AND ITS TYPES
A fire insurance policy is a contact of indemnity. It may be defined as "a contract by which the insurer in consideration of premium paid by the
insured agrees to indemnify him against any accidental
property due to fire, up to the sum agreed upon with him in the fire pc' -
Types of Policies. The main types of insurance policies are as l
Specific Policy. In case of specific policy, the insurance .make good the loss to the insured to the maximum extent of the face va .policy. For instance, a house valuing Rs. 5 lac is insured for Rs. 3 lac only If thehouses catches fire and is burnt to ashes, the insured can claim Rs. 3 lac only Itcannot realise more amount from the company.
Valued Policy. A valued policy is one in which the insurer has to pay thefull value of the subject matter (goods, securities etc)- If the building is destroyedby fire, the insured has not to prove the actual value of the loss. The valued policy
is against the principle of indemnity and so are not commonly issued.
3. Floating policy. A floating policy is that which covers several items ofgoods lying in different localities under one sum and for one premium. Thefloating policy is taken by big manufacturers whose goods are stored in different
localities.
4, Average Policy. An average policy is that which contains an average clause. The average clause lays down that if the property is under insured, the insurer will bear only that part of actual loss as his insurance bears to the total value of the property. For example, a property is insured for Rs. 40 thousand as against its value of Rs. 80 thousand. If the loss due to fire is assessed at Rs, 20 thousand: the claim will be settled as under:
. Insured amount x Actual loss Value of property
40000 x 20000Claim = 80000 = Rs" 10<000
In this case, the insured is penalized for under insurance.
Comprehensive policy. In comprehensive policy alhjypes of risks suchas fire, burglary, riots, strikes, explosion, lightning, etc are covered
Blanket policy. Under blanket policy, both fixed and current assets ofthe business are covered under one insurance.
Loss of profit policy. Under this policy, the insured is indemnifiedagainst' the loss of profits caused by any interruption of business by fire.
Reinstatement of policy. Under this policy, the insurer pays theamount which is required to reinstate the assets or property destroyed. Theinsurer while calculating the amount of claim does not deduct the amount ofdepreciation from the original value of the asset.