7 Kinds of Fire Insurance Policies

7 Kinds of Fire Insurance Policies

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7 Kinds of Fire Insurance Policies
06 Jan 2017

There are a number of fire insurance policies to suit different interests. A number of factors are considered before deciding about the kinds of policies to be taken.

These factors are:

1. The type of risk involved.

2. The nature of the property to be insured.

3. The contents of the property.

4. Occupancy hazards.

5. Exposure hazards.

6. The time element.

The following kinds of policies are generally issued for fire insurance:

1. Valued Policy:

In this policy the value of the subject-matter is agreed upon at the time of taking up the policy. The insurer agrees to pay a pre-determined amount if the subject-matter is destroyed or damaged by fire. The principle of indemnity is not applicable to this policy. The agreed value may be more or less than the market value at the time of loss. These policies are generally issued for those goods or property whose value cannot be determined after their loss or damage. These goods may include works of art, jewellery, paintings, etc.

2. Specific Policy:

Under this policy the risk is insured for a specific sum. In case of loss of property, the insurer will pay the loss if it is less than the specified amount. It can be explained with an example: An insurance policy is taken for Rs. 50,000 and the value of the property is Rs. 80,000. If the property worth Rs. 40,000 is lost, the insured will get the whole amount of loss. If the loss is up to Rs. 50,000, it will be paid in full. In case loss exceeds Rs. 50,000, say it is Rs. 60,000, the indemnity will only be upto the amount insured i.e. Rs. 50,000. Under this policy the insured is not punished for getting a policy for lesser sum. The actual value of property is not taken into consideration.



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