Definition of Fire insurance, types
Fire insurance is a very useful insurance especially for businessmen who keep their goods costing millions of rupees in warehouses. There are different types of fire insurance. Grab more detailed information from here.
Meaning of Fire Insurance
It means insurance against any loss or damage caused to goods or property due to fire. It generally covers the cost of replacement of goods and repair of damaged property. The amount reimbursed by insured is equivalent to the estimated amount of loss due to fire within a specified period of time. The reasons of occurrence of fire should be according to those mentioned in policy so as to claim insurance amount from insured. Generally, insurance companies accept the claims in which fire is occurred naturally (eg. due to short circuit or faulty wiring, etc.) and exclude any fire due to wars or fraudulent practices.Types of fire insurance policy
- Valued policy: Under this type, insured pays the predetermined value of the subject matter as mentioned in policy. Such predetermined value may or may not be the actual value of loss due to fire.
- Unvalued/ Open policy: It is reciprocal form of valued policy. Here, actual value of loss is assessed and reimbursement is made accordingly. Thus, no value is agreed between the parties at the time of taking policy.
- Specific policy: Here a specific amount is paid in case of any mis happening. Actual value of subject matter is not considered. Let's understand this with the help of an example: If there is a policy taken of Rs. 50,000 for a property having actual value of Rs. 2,00,000 then the amount paid will be Rs. 50,000 in case of any loss irrespective of the fact that it is juts one-fourth value of actual value of the property.
- Average policy: Here the average amount of insurance is paid in case of any mishappening. It does not consider the actual value of loss or property. Thus, if a person has taken average policy of Rs. 50,000 (50% of total value), then in case of loss of Rs. 50,000 for a property of Rs. 1,00,000; the amount paid by insurance company will be Rs. 25,000 (50% of Rs. 1,00,000) instead of Rs. 50,000. Thus actual loss is not considered rather the average amount of loss is considered.
- Comprehensive policy: It covers all aspects of loss like loss due to fire, theft, burglary, etc. Some insurance companies also cover the estimated loss of profits due to fire. You can call it all-in-one policy.
- Floating policy: It covers the goods lying at different places/ warehouses under a single contract and premium. The loss is indemnified according to the 'average clause'.
- Replacement/ Reinstatement policy: It is not a very popular form. Here the insurer does not pay the cash to the insurer rather it replaces the goods to reinstate the property damaged due to fire.