Definition

Standard fire policy that usually covers fire due to any cause, subject to some exceptions which too
may be covered with additional premium. These policies may be extended further (by paying
additional premium) to include collateral damages or losses such as loss of income.

Fire Insurance Definition

Fire insurance means insurance against any loss caused by fire. Section 2(61 of the Insurance Act
defines fire insurance as follows: “Fire insurance business means the business of effecting,
otherwise than incidentally to some other class of business, contracts of insurance against loss by
or incidental to fire or other occurrence customarily included among the risks insured against in
fire insurance policies.”

What is ‘Fire’?

The term fire in a Fire Insurance Policy is interpreted in the literal and popular sense. There is
fire when something burns. In English cases it has been held that there is no fire unless there is
ignition. Stanley v. Western Insurance Co. Fire produces heat and light but either o them alone is
not fire. Lighting is not fire. But if lighting ignites something, the damage may be covered by a
fire-policy. The same is the case with electricity.

Characteristics of Fire Insurance

1. Fire insurance is a contract of indemnity. The insurer is liable only to the extent of the actual loss
suffered. If there is no loss there is no liability even if there is a fire.
2. Fire insurance is a contract of good faith. The policy-holder and the insurer must disclose all the
material facts known to them.
3. Fire insurance policy is usually made for one year only. The policy can be renewed according to
the terms of the policy.
4. The contract of insurance is embodied in a policy called the fire policy. Such policies usually
cover specific properties for a specified period.
5. Insurable Interest: A fire policy is valid only if the policy-holder has an insurable interest in the
property covered. Such interest must exist at the time when the loss occurs. In English cases it
has been held that the following persons have insurable interest for the purposes of fire
insurance- owner; tenants, bailees, including carriers; mortgages and charge-holders.
6. In case of several policies for the same property, each insurer is entitled to contribution from
the others. After a loss occurs and payment is made, the insurer is subrogated to the rights and
interests of the policy-holder. An insurer can reinsure a part of the risk.
7. Fire policies cover losses caused proximately by fire. The term loss by fire is interpreted liberally.
Example: A women hid her jewellery under the coal in her fireplace. Later on she forgot about
the jewellery and lit the fire. The jewellery was damaged. Held, she could recover under the fire
policy.
8. Nothing can be recovered under a fire policy if the fire is caused by a deliberate act of policy-
holder. In such cases the policy-holder is liable to criminal prosecution.
 9. Fire policies generally contain a condition that the insurer will not be liable if the fire is caused
by riot, civil disturbances, war and explosions. In the absence of any specific expectation the
insurer is liable for all losses caused by fire, whatever may be the causes of the fire.
10. Assignment: According to English law a policy of fire insurance can be assigned only with the
consent of the insurer. In India such consent is not necessary and the policy can be assigned as a
chose-in-action under the Transfer of Property Act. The insurer is bound when notice is given to
him. But the assignee cannot be recovering damages unless he has an insurable interest in the
property at the time when the loss occurs. A stranger cannot sue on a fire policy.
11. Payment of Claims: Fire policies generally contain a clause providing that upon the occurrence
of fire the insurer shall be immediately notified so that the insurer can take steps to salvage the
remainder of the property and can also determine the extent of the loss. Insurance companies
keep experts on their staff of value the loss. If in a policy there is an international over valuation
of the property by the policy-holder, the policy may be avoided on the ground of fraud.

Fire Insurance, Fire Insurance Policy

A fire insurance policy involves an insurance company agreeing to pay a certain

amount equivalent to the estimated loss caused by fire to the insured, within the
time specified in the contract. The indemnity is subject to change depending upon
the policy. One should confirm with the insurer about the types of risks covered,
since one cannot insure the property against all types of risks of fire.

Insurance policies are legally binding contracts between an insurance company and
a policyholder that establishes the details of coverage, specifying the conditions or
perils and compensation provided should they occur. A fire insurance policy is a
specific type of property insurance which covers the insured in the event their
home is lost or damaged during a fire. It is a common investment and is often
required and included as part of a homeowner’s insurance policy when a mortgage
is approved.
A fire insurance policy typically has four different coverage areas. The dwelling
portion refers directly to the home itself. The coverage for the dwelling should
always be enough to adequately replace the home. Rebuilding expenses are often
determined based on the actual square footage of the home in question. The portion
referring to other structures includes the coverage of garages or sheds that are not
part of the dwelling itself and are considered a separate area.

Personal property is considered a separate coverage area as well and includes the
contents within the home that are not part of the dwelling itself, for example
furniture, electronics, computer equipment, clothing and jewelry. Personal property
items of considerable value should be specifically listed as part of the fire
insurance policy, items that are not explicitly valued tend to be compensated with a
“standard” amount.

The fourth coverage area relates to additional expenses that exceed the insured’s
usual cost of living as a result of the fire damage. This can refer to the expenditures
of temporary housing among other things, all incurred when forced to live away
from your residence during the process of rebuilding or repairing. These expenses
need to be documented in order to receive reimbursement later. Usually there is a
limit set for additional expenses claimed.

When insurance companies pay losses on claims it is either based on actual cash
value or replacement value. Actual cash value commonly refers to the fair market
value of the home at the time the loss or damage is incurred. Replacement value
means the insured would be compensated for the entire cost or replacing, repairing,
or rebuilding the home. Actual cash value can be considerably less than the
replacement value and is usually less preferable. Most fire insurance policies also
cover any water damage resulting from the process of fighting the fire, such as that
created from a fire hose or a broken pipe. Some insurance policies also make
stipulations for building code upgrades, for example if current building codes
require a specific material but the home in question had a substandard quality of
material, the homeowner would be expected to account for the discrepancy in cost
relating to the repair process.

What is the extent of coverage under a Fire Insurance Policy?

Fire insurance provides protection for the estimated value of the physical house.
However, there are a number of exclusions to the same, for example medical bills,
loss of human life and pets, loss of personal belongings, structures outside the
property (including garages and gazebos), damage to the landscape and expenses
for accommodation for the time being. These things can be covered under a
package of extended property insurance.

What are the main types of Fire Insurance policies?

* Specific Policy: The insurer is liable to pay a set amount lesser than the
property’s real value. In this policy, the property’s actual value is not considered to
determine the indemnity. The average clause, which requires the insured to bear
the loss to some extent, does not play a role in this policy. In case the insurer
inserts the clause, the policy will be known as an average policy.

* Comprehensive policy: This all-in-one policy indemnifies for loss arising out
of fire, burglary, theft and third party risks. The policyholder may also get paid for
the loss of profits incurred due to fire till the time the business remains shut.

* Valued policy: This policy is a departure from the standard contract of

indemnity. The amount of indemnity is fixed and the actual loss is not taken into
consideration.

* Floating policy: This policy is subject to the ‘average clause’. The extent of
coverage expands to different properties belonging to the policyholder under the
same contract and one premium. The policy may also provide protection to goods
kept at two different stores.

* Replacement or Re-instatement policy: This policy is subject to the re-

instatement clause, which requires the insurance company to pay for replacing the
damaged property. So, instead of giving out cash, the insurer can re-instate the
property as an alternative option.

Why does one need Fire Insurance?

Fire insurance is important because a disaster can occur at any time. There could
be many factors behind a fire, for example arson, natural elements, faulty wiring,
etc. Some facts that stress the importance of fire insurance include:

* Fire contributes to the maximum number of deaths occurring in America due

to natural disasters.

* Eight out of ten fire deaths take place at home.

* A residential fire takes place after every 77 seconds.

* The major reason for a residential fire is unattended cooking

Fire Insurance Claim Procedure:

 Individuals/corporates must inform insurer as early as possible , in no case later than 24

hours.
 Provide relevant information to the surveyor/claim representative appointed by the
insurer.
 The surveyor then analyzes the extent/ value of loss or damage.
 The claim process takes anywhere between one to three weeks.

What is Covered in Fire & Special Perils Policy?

 Accidental fires, lightning, explosion and implosion due to pressure vessels(used for
domestic purposes)
 By rioting mob, striking workers, malicious acts by third parties and damage by terrorists
 Impact damage by any rail/road vehicle or animal by direct contact.
 Commodities damaged by water used for extinguishing fire.
 Loss\damage caused by pulling down of adjacent buildings by the fire brigade to prevent
the flames from progressing.
 Breakage of commodities in the process of their removal from the premises where fire is
intense.
 Aircraft and other aerial and and/or space devices and/or articles dropped therefrom,
excluding destruction or damage occasioned by pressure waves caused by such devices
 Payments made to people employed in extinguishing fire.
 Subsidence and landslide, including rock slide.
 Natural calamities like storm, cyclone, typhoon, hurricane, tornado, flood and impact
damage.
 Damages caused due to bursting or overflowing of water tanks, apparatus and pipes
 Bush Fire