Fire insurance is a specialized form of insurance. It is designed to cover the cost of replacement, reconstruction or repair beyond what is covered by the property insurance policy. Fire insurance is insurance that is used to cover damage to property caused by fire.
Fire insurance is the most important type of insurance which provides security against the risk of fire. In fire insurance, there is a contract between insured and insurer. The insured has to pay the premium at a fixed rate to insurer and insurer compensates the insured amount to the insured party if the property of insured is lost due to the reason of fire. The insurer doesn’t compensate more than the insured amount even if the loss is estimated more than the insured amount. The concept of fire insurance was developed before the concept of life insurance.
Fire insurance is defined as ‘an agreement’ where one party in return for a consideration undertakes to indemnify the other party against financial loss. It may sustain by reason of certain subject-matter being damaged or destroyed by fire or other defined perils up to an agreed amount. (Agrawal)
On the basis of indemnity, fire insurance policies are classified as follows:
The following steps are observed while effecting fire insurance policy:
tyrocity.com. n.d. Electronic. 15 06 2016.http://notes.tyrocity.com/types-of-fire-insurance/
Investopedia. n.d. Electronic. 15 06 2016.http://www.investopedia.com/terms/f/fire-insurance.asp
Money matters.n.d. Electronic. 15 06 2016. http://accountlearning.com/types-of-fire-insurance-policies/
Puranik Amey. publish your article.net. Electronic. 15 06 2016http://www.publishyourarticles.net/knowledge-hub/business-studies/what-are-the-procedure-for-effecting-fire-insurance/840/
Fire insurance is a specialized form of insurance. It is designed to cover the cost of replacement, reconstruction or repair beyond what is covered by property insurance policy. Fire insurance has evolved to provide financial protection to a person or organization against the risk of losses due to fire.
Fire insurance is the most important type of insurance which provides the security against the risk of fire. Fire insurance is a contract of indemnity whereby the insurer undertakes to indemnify the insured against the financial loss caused by an event of fire to the extent of actual loss or the insured amount whichever is lower. The insurer doesn’t compensate the insured amount if the insured property is damaged by less than the insured amount. The insurer doesn’t compensate more than insured amount even if the loss is estimated more than insured amount. The concept of fire insurance was developed before the concept of life insurance.
According to M. N. Mishra, "Fire insurance is a device to compensate for the loss consequent upon the destruction of properties by fire."
Therefore, fire insurance is a contract between the insurer and the insured at which the insured pays specified sum of premium to the insurer till the maturity of the contract and the insurer compensates the loss of property of the insured damaged from accidental fire within the period of contract.
1. Floating Policy
A floating policy is issued to compensate the loss gods lying in different locations at warehouses, godowns, ports or railway yards etc. using single policy. This policy covers kinds of stocks and properties of a single owner in different places once for a single insured sum.
2. Adjustable policy
According to the changes of the stock, the insured amount is also changed. The premium is calculated according to the insured amount and the insured amount changed. Under this policy, the insured amount and the premium are determined on the basis of stock held by the insured n the beginning.
3. Excess policy
An excess policy is supplementary of fire insurance policy. It is purchased to cover additional risks beyond the coverage of original loss policy. The kind of fire policy is purchased by such merchants whose stock fluctuates from time to time. In this policy, the actual value of the excess stock is declared in a certain period of time.
4. Declaration Policy
Under this policy, the insurance of maximum amount of goods is made on the basis of past experience. The three-fourths of the premium payable is charged from the insured in advance, at the beginning of the contract. Every month the policyholder is required to declare the value of the present stock. At the end of the year, the amount of premium is determined for the whole year on the basis of the evaluation of monthly stock.