Fire insurance can be purchased as part of property insurance or as a stand-alone policy. Provides compensation for costs incurred in replacing, repairing, or rebuilding damaged property as a result of a fire.
Since fire loss estimates are not expected, this policy is compensated for the maximum amount set by the property insurance policy. The actual loss or pre-agreed amount is paid as compensation when applying for fire insurance.
Types of Fire Insurance Policies
To avoid the ambiguity of the claim value, certain types of clauses are included in this policy. Such forms provide further clarification of the premium payable and claim without the scope of the dispute.
Entrepreneurs should be clear about the type of policy they need and whether it is consistent with his or her business activities. Let's take a look at some of the types of fire insurance.
a) Value Policy: If it is difficult to obtain the value of the goods or articles at the time of request, a cost-effective policy is issued. For example, the value of paint or art or jewelry does not last for every day of the year.
In such cases, the estimated amount is prepared in advance by the insurance company and the policyholder, at the time of taking out the insurance. In the event of a serious incident, a predetermined amount is paid, and the actual loss is not assessed.
Here the collateral policy is not applied, but an attempt is made to compensate the losses of the insurers at a predetermined rate without entering into negotiations or disputes during the actual loss.
b) Specified Policy: Under this policy, the maximum amount payable is adjusted in advance. In the event of an adverse event, an amount equal to the actual loss or fixed amount, whichever is less, is payable.
For example, if a fire insurance policy is taken for a certain amount of Rs. 2 lakh, in the event of loss due to fire can cost Rs. 3 lakh, the amount payable is Rs. 2 lakh. However, if the loss is worth Rs. 1.5 lakh, the total amount of Rs. 1.5 lakh will be paid.
c) Estimation Policy: In most cases, the applicant selects the insurance value less than the property value. In such cases, the insurance company sets a “central clause” to penalize insurers for taking a policy below the value of the asset.
For example, the value of your store and in-store goods is Rs. 20 lakh, but he takes fire insurance of Rs. 10 lakh. In such a case, if a fire in the shop leads to an injury that costs Rs. 20 lakh, the insurance company will pay you Rs. 10 lakh only, under the central policy clause.
d) Floating Policy: If an entrepreneur has stocks in different areas, he or she may choose a floating policy. With the help of this one policy, all assets lying in separate warehouses can be protected together.
Such an arrangement eliminates the need to purchase separate policies for the entire warehouse. Additionally, you can select a central clause if you want to reduce the premium.
However, at the time of the loss, the amount paid is much lower than the actual loss, in the case of the intermediate clause.
e) Critical Loss Policy: Loss due to fire is not the only loss an insured person experiences after a fire breaks out. Your factory may lose important equipment and the production line may be down for a few weeks or months after a fire.
Loss of a product is a loss of business or profit. Such compensation may be claimed under successive loss policy. An entity in which continuous production is the basis must take a consistent loss policy to make good on such losses.
f) Comprehensive Policy: Businesses may want to cover their areas with all possible activities such as fire, burglary, theft, explosions, earthquakes, lightning, labor violence, and other similar causes. In such a case, the business owner should consider a comprehensive or entire risk policy, which can take care of all the causes of losses.
g) Replacement Policy: Loss of assets due to fire raises the need for new assets to restart business operations.
The policy comes with two variants. In the first option, do good with lost property on the basis of discounted value. Besides, it is good to pay for the actual cost of the returned property.
While taking out fire insurance, you should understand the replacement policy clause in order to receive a valid claim during a bad incident.
Coverage under a fire insurance policy
It covers all losses resulting from an accidental fire, in accordance with the terms and conditions of the fire policy determined by the value of the policy and not the extent of the damage caused by the property owner. Generally, the following losses are covered:
• Real loss of property due to fire
• Additional living costs due to damage to personal property
• Loss of a nearby building or property due to fire in an insured building
• Compensation paid to firefighters
• Electrical fires
• Overflow of water tank or pipes
Exemption from the fire insurance policy
Not all cases and cases are covered by fire insurance. Some cases are not included.
• Fires caused by war, nuclear accidents, violence or earthquakes
• A planned or deliberate fire by an enemy or a government official for any reason
• An underground fire
• Losses due to theft during or after a fire
• Cruel or hostile fire causes
This list does not include all possible submissions as they vary from different providers
Procedure to make a claim of Fire Insurance in India
In the event of a fire incident, you need to apply for fire insurance. To avoid rejection and delay the claim process, you should specify the procedure and documentation required.
• Immediately notify your insurance provider online or by calling their toll-free number 24/7
• Also, contact firefighters and police
• The insurance company will appoint an inspector to look at the situation
• Submit a duly completed application form and other proofs and photographs
• If approved, the claim can be paid from 15 to 30 days, as the time period varies with insurance companies
The concept of fire insurance is based on three important conditions that must be met before you can apply
• There should be a real fire in the insured premises
• The fire must be accidental and above the equal capacity of the policyholder
• Loss or damage must be due to accidental burns. Damage to heat or fire, if not accidental, would not be considered a result of the fire. Therefore, insurance does not apply in such cases
Benefits of Buying Fire Insurance
If you look at the amount that an insurance company can pay for a loss and save you from other problems, you should not ignore or underestimate fire insurance. Let's take a look at some of the benefits of buying this policy:
• Homeowners can reimburse the cost of damage to the building
• It also takes into account the cost of replacing household items, such as AC, television, computer, etc.
• In the case of a factory and office, the insurer may pay the cost of the damaged shares
• Insurance can cover the cost of repairs if damaged.