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Doctrine of Approximation in Fire Insurance

  • Author :
  • TATA AIG Team
  • Published on :
  • 11/04/2024
  • 2 min read

In India, much emphasis is placed on health and vehicle insurance. However, when it comes to property insurance, awareness and emphasis still need to catch up. Home insurance is significantly essential as natural calamities like earthquakes not only damage the home structure but can wreck homes completely, leaving the owners homeless.

Therefore, many non-life policies, such as property insurance, motor insurance, fire insurance, etc., offer protection from loss due to earthquakes. Since India is an earthquake-prone country, those with properties in an earthquake danger zone in India must have earthquake coverage.

Let us discuss the earthquake zones in India so you can decide if your property needs earthquake insurance coverage.

What is the Doctrine of Approximation Meaning in Fire Insurance?

The meaning of Doctrine of Approximation in fire insurance refers to a principle applied when determining the extent of loss or damage to insured property due to fire. It suggests that in cases where precise measurement of loss is impractical or impossible, the insurer should approximate the extent of damage in a reasonable manner to fairly compensate the insured.

This doctrine helps to prevent the overvaluation or undervaluation of properties, ensuring that policyholders receive appropriate compensation for their losses.

By adopting a pragmatic approach, insurers can ensure equitable settlements that reflect the true impact of fire-related incidents on insured assets.

Why is it Important in Fire Insurance

The doctrine of approximation in insurance is vital for ensuring fairness and equity within the insurance industry. It serves as a framework for determining the actual value of property and the extent of coverage in case of fire damage.

This doctrine helps to prevent overvaluation or undervaluation of properties, ensuring that policyholders receive appropriate compensation for their losses.

By establishing guidelines for assessing the value of insured properties, it promotes transparency and trust between insurers and policyholders.

Moreover, adherence to the doctrine of approximation enhances the efficiency of claims processing, minimising disputes and litigation. Overall, this doctrine plays a crucial role in maintaining the integrity of fire insurance contracts and safeguarding the interests of both insurers and policyholders.

Application Process of Doctrine of Approximation in Fire Insurance

Doctrine of approximation is founded on the principle of indemnification, which states that the insured should be compensated for the real loss experienced, but not more. There are a few critical steps to applying for the Doctrine of Approximation when it comes to fire insurance:

  • The insurer must first determine the true value of any property that has been damaged or destroyed by fire. Several methods, such as market value, replacement cost, and actual monetary worth, can be used to achieve this.

  • The insurer is required to deduct any value of salvage generated from the damaged property after the true value of the property has been determined. The worth of any remaining components of the property after a fire that can be sold or used for another purpose is known as salvage value. To calculate the net loss, this amount is deducted from the property's actual worth.

  • The policyholder is then entitled to receive reimbursement from the insurer for the net loss, up to the policy limit. The policyholder will only get the policy limit if it is less than the net loss. The policyholder will receive the net loss if the insurance limit exceeds the net loss.

  • It is vital to emphasise that the Doctrine of Approximation is only applicable to losses caused by fire. It does not cover losses caused by other perils, such as robbery or flood. Additionally, the doctrine only applies to losses covered by the insurance policy.

Legal Aspects of Doctrine of Approximation

Insurance Contract Law

Doctrine of approximation is frequently used when the worth of something is difficult to estimate. This can happen when the attribute is unique, or its exact value is unknown. In such instances, the insurance policy may include a clause allowing for the application of the approximation doctrine.

The policy may also indicate how to determine the property's value.

Under insurance contract law, an insurer must pay the insured the amount of the loss. The amount of loss is calculated by the property's worth at the moment of loss. If the value of the property is difficult to determine, the doctrine of approximation can be applied to approximate the value.

Insurance Disputes and Claims

Issues with property valuation might give rise to insurance claims and conflicts. In certain situations, the insurance company may determine the property's worth by applying the approximation doctrine. The insured can dispute the estimate and make an effort to establish the property's true value.

If a dispute emerges, arbitration or legal action may be taken to settle it. The worth of the property may occasionally be determined by an expert appointed by the court. To determine the property's worth, the expert may apply the approximation doctrine.


The Doctrine of Approximation in fire insurance policy holds significant importance, especially within the realm of SME insurance, as this principle underscores the necessity for insurers to assess risks diligently and fairly, it ensures that policyholders receive just compensation in the event of fire and burglary incidents.

Tata AIG is renowned for its commitment to providing comprehensive fire and burglary insurance coverage and reliable service tailored to meet our client needs.

By embracing the Doctrine of Approximation, Tata AIG’s fire insurance not only safeguards the interests of our clients but also fosters trust and confidence within the SME community.

Frequently Asked Questions

How does the Doctrine of Approximation benefit policyholders?

The Doctrine of Approximation benefits policyholders by ensuring they receive fair compensation for their losses even when precise valuation is not feasible. It allows insurers to use reasonable methods to estimate the value of the property, which helps expedite the claims process and provides timely relief to the insured.

How can policyholders ensure a fair application of the Doctrine of Approximation?

Policyholders can ensure a fair application of the Doctrine of Approximation by maintaining accurate records of their property, including purchase receipts, appraisals, and photographs. They should also promptly report any losses to their insurer and cooperate fully during the claims process, providing all relevant information to assist in determining the value of the loss.

Does the Doctrine of Approximation affect insurance premiums?

The Doctrine of Approximation itself does not directly affect insurance premiums. Premiums are typically determined based on various factors, including the value of the insured property, risk assessment, coverage limits, and other underwriting considerations. However, efficient claims processing resulting from the application of the doctrine may indirectly impact overall insurance costs.

Are there any statutory provisions or legal precedents that support the Doctrine of Approximation in fire insurance?

Yes, various statutory provisions and legal precedents support the application of the Doctrine of Approximation in fire insurance. For example, in many jurisdictions, insurance laws provide guidelines for valuing property losses and allow insurers to use reasonable methods of approximation when exact valuation is impractical. Additionally, court rulings often uphold the principle of approximation as a means of achieving equitable outcomes in insurance claims disputes.

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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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