TYPES OF FIRE INSURANCE POLICIES
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The principal types of fire insurance policies are given. below:
1. Valued policy
When the agreed value of the subject matter is mentioned in the policy is named as valued policy. This value may not necessarily be the actual value of the property. In the event of toss by fire the insurer pays the admitted value of the property.
2. Unvalued policy
An unvalued policy in one in which the value of the subject matter is not declared at the time of policy taken. But in case of loss the value is computed by assessment. This is also called an open policy.
3. Specific policy
In case of specific policy, the property is insured for a definite sum. If there is loss, the stated amount will have to be paid to the policyholder. But the actual value of the subject matter is not considered in this respect. For examples if a policy is taken for Rupees 20,000 upon a building whose actual value is Rs.1,00,000 and afire occurs causing the amount of loss Rs.20,000. The insurance company will pay the whole amount of loss of Rs.20,000 irrespective of the fact that the building was insured for one-fifth of its value.
4. Average policy
An average policy is one which contains the average clause. This clause required the insurance company to pay only that portion of the loss which is borne by the insured amount to the actual value of the subject matter of the insurance. For example a value of the property is Rs.1,00,000. It is insured for Rs.60,000 (60% of the total value) and the amount of loss is Rs.60,000. The insurance company will not pay Rs.60,000 to the policyholder but will pay Rs.36,000 (60% of Rs.60,000).
5. Floating policy
A floating policy is that which covers the fluctuating risk of several goods lying in different localities for supply to various markets. Such a policy is usually taken out under one sum and one premium by the businessman whose goods are lying at docks and warehouses.
6. Stock declaration policy
This policy is taken for covering the stock where great fluctuations in the value can happen throughout the contract period. On such policy 75% of the premium has to be deposited in advance. The maximum liability of insurance company is specified in the policy by the insured. At the end of year the average stock and final premium is calculated.
7. Loss of profit policy
Such type of policy covers the loss of profit which sustains as a result of fire. This policy is also known as consequential loss policy.
8. Standard fire policy
This policy is issued for compensation of all direct loss or damage caused by lighting and burning. Such policy also covers damages by earthquake, hair flood, explosion, cyclone and riot.
9. Reinstatement policy
Under this policy insurance company pays more than the actual value of the property destroyed by fire in order to cover the cost of replacement of the said property. It is also called as “Replacement Policy”. This type of policy is not very common in these days.
10. Schedule Policy
A schedule policy is one which insures many properties under collective terms and conditions, Details of the properties and their respective rates of premium are listed in one policy only for the convenience of the insured.
11. Sprinkler leakage policy
This type of policy covers the loss of building as a result of the damage by he
leakage of liquid or water.
12. Excess policy
This policy is issued for the stock of merchandise whose value is constantly fluctuating. In such case it is not suitable to take one policy for certain sum. So the insured takes an ordinary policy for minimum value of the stock and excess policy for excess value of the stock. The actual value of the stock will be reported periodically
13. Maximum value with Discount policy
Under this policy one third discount of the premium paid is refundable to the insured at the maturity of the policy. This policy covers the risk for maximum amount.