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Benefits & Features of Fire Insurance

Protecting your business against fire-related outbreak is essential.  Fire Insurance is the ideal protection plan to ensure optimum financial protection in case of a fire outbreak. The policy protects the insured building, assets, furniture and fixtures against a series of perils. The insured is reimbursed based on the market value of the property.

Every entrepreneur or new business set-up should own fire insurance as it comes in handy in mitigating the aftermath of fire damage. As no property is resilient to fire or other natural disasters. The repercussion can lead to huge fragility if you’re not backed by financially. At times, a small business may face huge financial hardship if not covered by insurance. Hence, Fire insurance can be a saviour in the event of privation.  

Fire insurance provides financial security for home and office, including furniture and other business assets. It turns out useful for the insured as it compensates the value of property and assets damaged in the fire. This makes it important for personal, national and social sectors to stay covered under fire insurance.

Let’s gather some information about the concept!

Features of Fire Insurance

1. The fire insurance works under the principle of indemnity. This means under fire insurance, the insured will be compensated for the loss up to a certain limit subject to the maximum sum insured.

2. The policyholder should have insurable interest with the subject-matter of the insurance contract at the time of buying as well as in case of loss.

3.  Under a fire insurance policy, the insurance provider covers the risk of damage/loss caused by fire or any cause, which is close by reason of such loss.

4.  Fire insurance comes with one-year tenure. The policy lapses automatically after one year unless it is renewed.

Uses of Fire Insurance

Fire insurance has been designed to reimburse the cost of repair, reconstruction or replacement of the property damaged or destroyed in a fire. Besides, fire insurance also covers property loss or damages due to smoke, water and damages caused by the firefighters.

Characteristics of Fire Insurance

If you are planning to insure your office space with fire insurance, here are some of the basic characteristics of fire insurance that plays an important role in ensuring the right policy:

Insurable Interest

Fire insurance demands the insured to have an insurable interest in the property to be insured. The insurable interest is the basic of having fire insurance, which makes the insurer eligible for ensuring insurance benefits in case of loss. It should exist both at the time of buying insurance and while claiming your insurance.

Utmost Faith

Fire insurance deal is based on the principle of greatest good faith, which demands no secrets to keep. This compels the insured to disclose all important points with regard to the subject-matter of the fire insurance policy so that the insurer can have a proper analysis of risks associated. The insured should give all the related information pertaining to location, construction of the property, the probability of fire incident etc. however, the insurance company has all rights to terminate the contract if any important point is not disclosed.

Likewise, the insurer should give the complete details of the policy without hiding about the clause or hidden charges.

Contract of Indemnity

The policyholder can claim up to the sum insured offered under fire insurance. In case there is no loss, no claim will be entertained.

Personal Insurance Contract

As fire insurance provides financial protection to the property, the involvement of the insured is inevitable. Thus, it is necessary for the insurance provider to keep an eye on every behaviour of the insured. Moreover, the insured can’t make any change in the policy without the consent of the insurer. Even if the possession is transferred to a third-party and the insurer is not informed, it has complete authority to terminate the policy right away.

Personal Right

The person whose name is mentioned in the fire insurance contract as the policyholder is eligible to receive the insured amount in case of any loss or damage.

Direct Cause of Loss

The only condition to avail the benefits of fire insurance is that fire should be the immediate and direct cause of the loss or damage for which the claim arises.

Description of Property

The true description of the property at the time of buying insurance should be mentioned in the fine print. It is important as the insurer compensates the claimed amount only if the accident happens at the mentioned location. Any change in the location will lead to claim rejection. If there is any change, the same needs to be intimated to the insurer.

Read more: Types of Fire Insurance Policy in India

Wait Here is the Catch!

While claiming for the losses under fire insurance, an average clause has to be fulfilled. This says a portion of the total loss has to be borne by the insured. The insurer will bear the proportion of the loss up to sum insured. Simply put, the insured has to bear the difference amount.

Let’s Illustrate-

  • Suppose you have a property worth Rs. 10,00,000, where it is insured with fire insurance for Rs. 5,00,000. Now, in case of a fire outburst, if half of the property is damaged, the insurer will pay only 2,50,000, using the following formula:
  • Insured amount (Rs.5,00,000) x Actual loss(Rs. 2.5,00,000) / Actual value of the property(Rs.10,00,000)
  • The complete policy amount is payable only in case of complete destruction of the property if a fire outbreak occurs.

Wrapping it Up!

Remember, fire accidents are unanticipated and destructive. A fire insurance policy gives the financial security for home, furniture, shares, and other business assets. The policy acts as a saviour by providing the actual value of the property in case of fire damage. Therefore, by owing a fire insurance policy in India, you can provide the utmost financial shield to your business.

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