Fire Insurance is an insurance contract between an insurer and an insured. It protects you from property damages due to fire and other covered perils.
What are the principles of fire insurance?
- Indemnity – It compensates only to the extent of the actual loss suffered.
- Proximate cause – the nearest cause of the damage must be fire or other peril which is covered in fire insurance.
- Insurable interest – It arises out of a financial relationship between the policyholder and subject matter (the property which is to be insured). It may arise out of ownership, possession, etc.
Who should take Fire Insurance?
Any individual, organization, or body having an insurable interest in the property can apply for a fire insurance policy to protect their property against fire and other perils.
- An individual who is an owner of a property should buy fire insurance
- An organization should buy fire insurance for the building of the organization (if the company has ownership rights of the building)
- A landlord who is renting his property to someone else can also buy fire insurance for that property as he owns the property and has an insurable interest in it.
Banks prefer to give a loan against an insured property. Therefore, if you are planning to apply for a loan, you should buy a fire insurance policy
What is covered under Fire Insurance?
- It covers the basic structure and construction cost
- Electrical installations like Machinery
- Stocks – raw material, semi-finished, and finished goods
- furniture, and stock of the shop/hotel
- All personal belongings in the home
Which is not covered under fire insurance?
- Earthquake (can be covered by paying an additional premium)
- Caused by a third party- for example, your factory is on the ground floor and the fire was caused by someone from the first floor
- You should be aware of the items you want to cover so that you can calculate the value of your belongings.
- Proof of insurable interest (ownership) should be there
- It’s important to have fire safety equipment too, the quality of which would also help you get a lower premium.
Things to declare
- You need to declare the kind of products that you want the insurer to secure, depending on which the premium will be decided, flammable materials premium would cost a lot more.
- You have to declare the previous losses you have had too.
Always take insurance equal to the value of the items you want to insure.
For instance, if you have taken fire insurance of Rs. 1 crore for a stock whose value is Rs. 2 crores. Later, if you suffer a loss of 50%, then the insurer will pay 50% of the loss suffered as insurers work on a pro-rata basis. Hence, you will be entitled to get Rs 25 lakh only.
Therefore, it is very important to cover the entire property and not only a part of it.
Important Documents for Fire Insurance
- Fire department report
- Police FIR – this is crucial evidence that explains the cause of the fire
- Panchnamma report – Police take evidence from 5 people who were there post-fire incident
- Evidence to establish the value of the stock
- Surveyor report
Once you inform your insurance company, they will send a surveyor. A surveyor is a professional who makes a report. This surveyor report is very important to evaluate your loss.
And if you have any objection to the surveyor report, you can also submit an objection letter to your insurer.
Within 30 days from the surveyor’s visit, a discrepancy report for further information or claim acceptance will be sent to you.
The claim settlement might not always be as expected. If you are not satisfied with the claim settlement, you can contact your insurer again.
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