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What are the characteristics of Fire Insurance Policy?

  • Author :
  • TATA AIG Team
  • Published on :
  • 15/01/2024
  • 2 min read

With uncertainty being an unavoidable aspect of life, individuals and organisations depend on the protection insurance policies provide to tackle these unavoidable challenges. An insurer guarantees to protect the insured against damages arising from emergencies in exchange for an amount of money.

You must understand the meaning, importance, features, and characteristics of fire insurance to manage its complexities successfully.

What Is Fire Insurance?

Fire insurance refers to a type of insurance that covers the policyholder against loss or damage caused by fire. Under the claim, there is coverage for repair, reconstruction, or replacement costs incurred on properties damaged by fire incidents.

Fire insurance policies cover a wide range of assets, such as inventory, buildings, equipment, and personal property. Apart from direct fire damage, it also covers damages caused by smoke and water that firefighters use to extinguish the fire.

A fire and burglary insurance plan is suitable for many categories of people, including home and business owners. It also includes tenants who can use the policy to protect your expensive gadgets, appliances, and other belongings.

Why is a Fire Insurance Policy Important?

In India, fire-related incidents are common due to several reasons, including manmade and natural disasters, electrical malfunctions, etc. A fire can lead to significant financial losses due to damage to property and assets. It can impact individuals and businesses.

A fire insurance policy plays a crucial role in mitigating the financial impact of these incidents and providing monetary compensation against the damages. Moreover, it is mandatory for some businesses, especially those engaged in the storage and handling of hazardous items, to have fire insurance. This is a precautionary measure to stay protected from financial burdens and respond to fire incidents more effectively.

Characteristics of Fire Insurance

Now that you are familiar with the fire insurance definition, you must understand its characteristics. These fire insurance characteristics play a crucial role in ensuring that the insurance policy suits your requirements.

Insurable Interest in Property

Fire insurance is issued when the insured has an insurable interest in the property. Insurable interest means that the survival of the insured items and the losses suffered due to destruction matter to the policyholder. The policyholder must have an insurable interest when buying the policy and filing a claim.

Utmost Faith

A fire insurance contract rests on the principle of utmost good faith, which means that the policyholder must share all vital information related to the subject of the insurance policy. There should be no secrets. This clear communication should enable the insurer to analyse the associated risks with more precision.

The insured should provide details about the property’s location, construction style and design, probability of fire incidents, and other related information. The insurance provider has the authority to terminate the policy if any information is hidden or inaccurately disclosed.

The insurance company, at its end, should spell out the inclusions and exclusions of the policy with transparency. There should be no hidden charges or clauses.

Personal Insurance Contract

The nature of fire insurance is such that it protects property against loss and damage, making the policyholder’s role inevitable. Thus, insurance companies must gather complete information about the policyholder and monitor their behaviour.

Additionally, the policyholder cannot amend the terms of insurance without the consent of the insurer. The insurer can terminate the policy with immediate effect if the property’s possession is transferred to a third party without intimation.

Indemnity Contract

The claim amount is restricted to the sum insured limit. You cannot apply for a claim if there is no loss.

Personal Right

The policyholder, or the person whose name is written in the fire insurance policy, is entitled to receive compensation in case of losses or damages.

Direct Fire Damage

You can avail the benefits of fire insurance only if the direct and immediate cause of the damage or loss is fire. If a tangible property and its contents are damaged directly by an accidental fire, you can file a claim for the losses.

Moreover, direct fire damages extend to the losses suffered by the building’s contents when firefighters spray water and smoke to put out the fire.

Description of Property

It is necessary to mention the property’s location and description in the fire insurance contract. The insurer will provide compensation only if the fire incident occurred at the mentioned location. The claim will be rejected if the location changes. Thus, inform the insurer about a location change to avoid last-minute hassles.

Features of Fire Insurance

Here’s a look at the features of fire insurance.

  • Fire insurance is bound by an indemnity clause. This means that the compensation you receive for your loss is restricted to the limit of the maximum sum insured.

  • The policyholder must hold an insurable interest in the property insured while buying the policy and also while filing a claim.

  • The terms of a fire insurance policy apply only when the cause of damage or loss is fire and a reason associated with the fire incident.

  • The tenure of fire insurance is one year. The policy lapses if you do not renew it on time.

Benefits of Fire Insurance

Fire insurance is an essential safeguard for home and business owners. It provides coverage against fire damage. To make an informed decision, you must go through its advantages.

Financial Protection

One of the primary benefits of fire insurance is its ability to safeguard the owner financially. It offers coverage for repair and reconstruction costs incurred after a fire. This protection is of immense importance because it keeps you secured from financial burdens and crippling expenses.

Coverage for Contents

The insurance plan covers contents as well. This means you can claim compensation for damages or losses caused to electronics, furniture, and personal items. Comprehensive coverage is a significant benefit of this type of insurance.

Peace of Mind

You can enjoy peace of mind when you know you will be covered for losses. You know you would not have to overcome financial ruin in the event of a fire. This assurance is noteworthy. You can focus on recovery instead of expenses.

Liability Protection

Some insurance plans offer liability coverage. In the event the fire spreads to neighbouring properties, causing damage, a fire insurance policy offers coverage. This benefit is often overlooked but critical.

Additional Living Expenses

Your home may become uninhabitable after a fire. Insurance can provide living expenses. In the case of businesses, the policy allows you to continue business operations. This benefit is a boon during repairs or rebuilding.

What Are The Inclusions and Exclusions Of A Fire Insurance Policy?

Listed below are the general inclusions and exclusions of fire insurance. However, the exact inclusions and exclusions may vary between policies and insurers.

Inclusions

Destruction, damage or loss caused to the insured property due to fire from natural heating, spontaneous combustion or fermentation.

Damages resulting from fire implosions or explosions.

Damage to the insured property caused by spontaneous fires arising from extreme weather conditions or overgrown bushes set to fire.

Losses suffered because of missile testing operations conducted on property premises.

Damages caused by external physical items like walls, aircraft, falling trees, vehicles, animals, etc.

Damage caused to the property due to overflowing or bursting of pipes, water tanks, and apparatus.

Loss or violent destruction resulting from volcanic eruptions and earthquakes.

Violent destruction or damage caused by floods, tornados, storms, typhoons, cyclones, hurricanes, inundations, and tempests.

Exclusions

If the fire results from heating or drying processes, there is no coverage.

If the property is burnt down by order of a public authority, it is not included.

Explosion or implosion to economisers, boilers, machinery, vessels or apparatus that generate steam.

Fire resulting from ill intentions.

A fire caused due to burglary.

Some policies cover the losses of other types, like damage to third-party property or loss of rent. Policyholders must understand the terms of their policy and the types of losses covered under it.

Conclusion

Fire insurance is a crucial type of business insurance policy. It protects assets, residential and commercial, from the losses occurring due to fire. The policyholder can claim financial compensation for damages caused by fire, as well as those caused by water and smoke used by firefighters to extinguish the fire.

Tata AIG offers fire insurance plans with coverage for any kind of loss arising due to fire and allied perils not in your control. You can choose from two plans - the Business Guard Sookshma Package Policy and the Business Guard Laghu Package Policy.

FAQS

What are the benefits of a fire insurance contract?

Fire insurance creates a financial shield against unpredictable property damage or destruction due to fire. Moreover, it guarantees peace of mind and business continuity.

Who needs fire and burglary insurance?

Homeowners, tenants, and business owners need fire and burglary insurance to secure their property against fire, burglary, and housebreaking.

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Disclaimer / TnC

Your policy is subjected to terms and conditions & inclusions and exclusions mentioned in your policy wording. Please go through the documents carefully.

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