Fire Insurance is defined as "the business of effecting, otherwise than independently to some other class of business, contracts of insurance against loss by or incidental to fire or other occurrence customarily included among the risks insured against in fire insurance policies."

Fire insurance is an agreement   whereby   one party (the insurer), in return, for a consideration undertakes to the indemnify  the other party (the insured) against financial loss which he may
sustain by reason of certain defined subject matter being damaged by the destroyed by fire or other defined perils up to an agreed amount.

The word fire here does not mean the fire used for domestic and household activities. It refers to fire which is not caused intentionally and has no bound, and it is production of ignition, light and smoke by combustion.

It is also one of the oldest types of Insurance which emerged in London.

On 2nd September 1666, a great fire break out in London which caused mass destruction in city burning 13,000 houses and lasted for 5 days. This led to emergence of Fire Insurance Policy so as to compensate people for the losses
suffered by them and so they can start their life again after such a mishap. The first Fire Insurance Company was established in 1681, Insurance Office for Houses to insure 5000 brick and frame houses. Later on may more Insurance Companies were established such as Hand-in Hand, Sun Fire Office, Westminster and the Royal Exchange in 1720.

 

PRINCIPLES OF FIRE INSURANCE

🠶Insurable Interest in Fire Insurance
(insurable interest in the subject matter of the contract both in the at the time of taking the policy and the at the time of loss)
🠶The principle of Good Faith in Fire Insurance
🠶The principle of indemnity
🠶Proximate Cause of Fire Insurance
🠶The doctrine of Subrogation
🠶Warranties in Fire Insurance

🠶 A Fire insurance contract like any other insurance contract must fulfill the essential elements of a valid contract like offer and the acceptance, lawful consideration, legality of object etc.
🠶 Premium is a required to be paid the at the time of taking policy
🠶  Fire insurance usually taken for any year duration but in the some
cases for short periods also
🠶 Fire policies can be assigned with the prior consent of the insurer.
🠶 The loss must be outcome of fire or ignition only
🠶 Nothing can be recovered under a fire policy if the fire is caused deliberately.
🠶 In case of several policies for the same property each insurer is entitled to CONTRIBUTIONS from other insurers. After indemnification, the insurer is SUBROGATED on to the rights and interest of the policy holders.

KINDS OF FIRE INSURANCE POLICY

▶ 1. Valued Policy

As the name suggests, the value of the insured property is pre-determined at the inception of the policy. In case of loss suffered by the insured, a fixed compensation amount is paid by the insurer irrespective of the actual amount of financial loss suffered by the insured. The claim amount may be less or greater than the market value of the property and will not include renovations made in the property.

▶ 2. Valuable Policy
It is reserve of the above policy. Here, the value of the insured property is determined at the time of loss and claim is paid depending on the market value of the property at the time of damage.

 

▶   9. Reinstatement Policy

Here, the Insurance Company replaces or reinstates the insured property in
case of damage of fire instead of providing monetary compensation.

▶   10. Comprehensive Policy
It is that one which Insured gets coverage from not only loss by the fire but also from theft, war, riot, strike and etc. The premium charged for such a policy is very high but it provides security to insured against many risks.

▶   11. Consequential loss Policy

It covers the consequential loss as well loss by fire, suffered by the insured. As discussed in comprehensive scope, consequential loss is loss suffered by the insured in terms of loss in profit, salary, inflation incidental to the occurrence of the fire.