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.
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