Fire Insurance Types

Fire insurance is a kind of insurance which covers damages and losses caused by fire. Fire insurance helps to cover the risk of loss of property caused by fire accidentally or unintentionally. A fire insurance policy covers the loss that the insurer may suffer due to destruction of or damage to property or goods, caused by fire, during a specified period and up to agreed amount. The policy specifies the maximum amount, which the insured can claim in case of loss. This amount is not the measure of the loss. The loss can be analyzed only post the fire incident. The insurer is liable to make the payment for the actual amount of loss not exceeding the maximum amount fixed under the policy.

Valued Policy

This is a fire insurance policy in which an agreement is framed and the insurer undertakes to pay in the event of destruction of property by fire.

Specific Policy

This is a fire insurance policy which insures a risk for a specific amount. In case of any loss under this policy, the insurer pays all the loss provided. It is not more than the sum specified in the policy. Thus, the value of the property is not considered for this purpose.

Average Policy

This is a fire insurance policy that is insured if the property is under-insured, ie; insured for a sum smaller than the value of the property. The insurer must bear only the proportion of the actual loss which the sum assured bears to the actual value of the property at the time of loss.

Floating policy

This type of fire insurance policy covers several types of goods lying at various locations for one amount and one premium. The premium normally charged under this policy is the average of the premia that would have been paid if each batch of the goods had been insured under the specific policy for specific sums.

Excess Policy

When the stock of the insured fluctuates, the insured can take a policy for an amount below the amount in which his stocks do not normally fall under. In this instance, the insured might have to take another insurance policy to cover the maximum amount of stocks which might reach sometimes. The former type of policy is called First Loss Policy and the latter is called Excess Policy.

Blanket Policy

A blanket policy is that which covers all assets, fixed as well as current, under one policy.

Comprehensive Policy

An insurance policy which covers risks such as fire, flood, riots, strikes, burglary etc, up to a certain specified amount is known as a comprehensive policy.

Consequential Loss Policy

The objective of this insurance policy is to indemnify the insured against the loss or profit caused by any interruption of business due to fire. It is also known as loss of profit policy.

Reinstatement Policy

It is a policy under which the insurer pays the amount which is sufficient to reinstate assets or property destroyed.

Open Declaration Policy

It is a policy where the insured makes a deposit with the insurer and declares the value of the subject. Risk of such nature is covered. Such policies are normally taken where the value of stocks etc, fluctuates significantly.

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Frequently Asked Questions

Common questions about Fire Insurance Types.

A fire insurance policy is a contract that provides coverage for losses and damages caused by fire accidents. It specifies the maximum amount that the insured can claim in case of a fire-related loss, and the insurer is liable to pay for the actual amount of loss, up to the specified limit.

A valued policy is an agreement where the insurer undertakes to pay the agreed amount in case of property destruction by fire. On the other hand, a specific policy insures a risk for a specific sum, and the insurer pays the entire loss, provided it does not exceed the sum specified in the policy.

An average policy is applicable when the property is under-insured, meaning the insured amount is less than the actual value of the property. In such cases, the insurer bears only the proportion of the actual loss that the insured sum bears to the actual value of the property at the time of loss.

A floating policy covers various types of goods lying at different locations for a single insured amount and a single premium. The premium charged is typically the average of the premiums that would have been paid if each batch of goods had been insured separately under specific policies.

An excess policy is taken to cover the maximum amount of stocks that may sometimes exceed the normal stock levels. It is used in conjunction with a first loss policy, which covers the stock up to a certain amount below which it does not normally fall.

A blanket policy is a comprehensive policy that covers all assets, both fixed and current, under a single policy. It provides coverage for various types of assets and locations, unlike policies that cover specific risks or properties.

A comprehensive policy is an insurance policy that covers multiple risks, such as fire, flood, riots, strikes, burglary, and others, up to a specified amount. It provides broader coverage than policies that cover only a single risk.

A consequential loss policy, also known as a loss of profit policy, is designed to indemnify the insured against the loss of profit caused by any interruption of business due to a fire accident. It covers the financial losses resulting from business disruption, in addition to the physical property damage.

A reinstatement policy is a type of fire insurance policy where the insurer pays the amount required to reinstate or rebuild the assets or property destroyed by fire. It covers the cost of reinstating the property to its pre-loss condition.

An open declaration policy is a type of fire insurance policy where the insured makes a deposit with the insurer and declares the value of the subject matter to be insured. It is typically used for risks where the value of stocks or assets fluctuates significantly, and the insured can make declarations as per the changing value.