WHAT IS FIRE INSURANCE

WHAT IS FIRE INSURANCE..

Fire insurance is a contract between the insurance company and the policy-holder wherein the insurance company undertakes in exchange for a premium to indemnify the loss or damage caused to the specified property of the insured by fire or lightning. The contract will be for a specified period of time and the company will compensate for the actual loss caused by fire which in no case exceeds the maximum limit of the insured amount.
Essentials of a Fire Insurance Contract
The main essentials of fire Insurance contract ar as follows:
1. Contract of indemnity. Fire insurance like the marine insurance is acontract of indemnity. The insured can claim the actual loss caused to theproperty by fire, remaining of course within the insured amount.
The insured cannot make a profit from contract. A policy-holder cannotget an overvalued fire policy of his property, This will encourage the insured to gethis property burned to ashes and then claim the full insured amount and make aprofit out of it.
Prescribed period. The fire insurance contract is for a specified period oftime usually for one year. It is annually renewed by the payment of a freshpremium.
The limit of lability. In case the insured property is destroyed by fire, thepolicy holder cannot claim the market value of the property. The claim isdetermined by measuring the actual loss or damage. The amount which appearson the face value of the policy expresses the limit of liability of the company.
Payment of the claim. The payment of the insured property damaged byfire as per contract is made to the person or persons named in the policy asinsured.
Interest of the policy. If the fire insurance contract covers the building,then the claim in the even of loss will be met of the building only. If the policygives a "Package" or multi-insurance coverage in one policy, covering fire, theft,burglary, car liability, etc. etc.. and only one premium is paid for this 'packagepolicy', then in the event of loss, the policy holder is indemnified (paid) for the totalloss remaining within the limit of the liability of the money.
Assignment of Policy. The insured under the contract cannot assign hisinterest in the policy to any third party without getting prior consent of thecompany. The assignment without the consent of the company is void at law.
• 8. Consequential loss. The consequential loss (business interruption unless specifically covered under the contract are not a part of fire loss.
9. Direct loss and damage. The fire insurance contract also s: loss to be covered by the policy must be a direct loss i.e.. the f«re rrust be immediate cause of the loss
10. Insurable Interest. In a fire insurance contract, the insured must havemsuraWe nterest in the subject matter of the policy failing which the contract isvoid at law. Insurable interest is created when in the event of a loss, the insured
a financial loss himself and when compensated by the company, he is financially restored to his previous position.
11. Absolute good faith. The insurer and the insured will place all the cardsat the table and will not willfully conceal or misrepresent any material fact fromeach other. The concealment or fraud before or after a loss will make the policyvoid at law.