Fire Insurance Coverage
Fire insurance is a contract by which the insurance company agrees on payment of premium to indemnify the insured, up to an agreed amount, against financial loss bye fire which may arise during a particular period to the subject matter. It is a contract of indemnity which is usually in the form of policy. The fire insurance contract is for a period of one year and often is cancel able by either party before the term has expired. Fire insurance company not only grants protection to policy holders against the fire risk but also renders valuable part in the reduction of fire waste. They spend money on fire prevention techniques and conduct research in order to find out means for minimizing the chances of losses.
Essentials of fire insurance contract
1. Disclosure of material facts
The insured must disclose all material facts in respect of the subject matter. The contract shall be voidable in the event of misrepresentation or non disclosing of an necessary facts.
2. Insurable interest
It is the essential for the insured to have insurable interest in the subject matter of both when the policy is affected and when the loss takes place.
3. Contract of indemnity
The principle of the contract of indemnity is applicable to fire insurance. The amount can be claimed only after the loss has taken place during the stated period. If there is no loss no claim will be accepted.
4. Personal contract
Fire insurance is a personal contract between the insured and insurer. The policyholder cannot assign or transfer it without the perior consent of the insurance company.
A fire policy is issued for a period of 10 days to 12 months but it can be renewed after the expiry of their period.
6. General conditions
There must be an agreement in the prescribed form. The concerned parties must be competent to contract. The object must be legal and not against the public interest.
7. Personal Right
The person whose name has been mentioned in the contract, is entitled to receive the insured sum from the insurer at the event of loss by fir eon insured property.
8. Claim Limit
The actual market value of the goods or property destroyed by fire can be claimed only by the insurer. In such type of contract there is no profit motive.
9. The premium and Consideration
The contract is based on the consideration which means the granting of protection by the insurer in exchange for the payment of premium by the insured. The policy must mention the sum of insurance and the rate of premium.
10. Description of the subject matter
It is essential part of the contract that the policy must describe the: location of the property. It helps the insurer to determine the rate of premium.
11. Scope of protection
The insurance company may grant the protection against all direct loss by fire lightning and other perils. The contract must specify the description of loss in order to consider the approximate cause.
12. Termination of the contract
The contract of fire insurance may be terminated due to three events:
- (i) Violations of the rules
- (ii) Cancellation
- (iii) Expiration of the term without renewal.
Under this principle the insurer after paying a loss has ful1 right and privileges against third party in respect of loss so paid for. These rights may be justified, The problem of subrogation arises when a fire is caused by the negligence of the third party, for which negligence the party whose property is destroyed by fire may recover under rules.
14. Suspension of the policy
The insurance company is empowered to suspend the insurance due to some reasons. The insurer shall not be liable for loss happening if the chances of risk increase by any means within the control of the policy holder.
15. Notice of loss
The policy holder must serve immediate notice in writing to the concerned insurance company of any loss. It enable him to take action to reduce the loss, to investigate the reason of fire and to determine his liability.
16. Adjustment of loss
On receiving the notice; the insurer makes arrangement to adjust the loss. The company or its representatives with considerable authority may enter and take possession of the damaged property.