Types of Fire Insurance Policy?


Meaning: -The Fire Insurance protects the insured against the risk of fire. Any property which is subject to damage by fire can be insured against fire. The loss due to fire, lightning and explosion is also covered by Fire Insurance.
Fire Insurance is for protection and not for profit. The amount of premium of fire insurance depends upon the value of subject matter, place of storage and extent of risk involved. Fire insurance protects against the risk of damage by fire property and assets.

Definition: - According to Indian Fire Insurance Act, 1938; "In addition to other insurances, fire insurance is that insurance contract which takes place against fire and such other risks which are mentioned in the fire insurance contract."
Types of Fire Insurance Policy:

1.       Valued Policy:-This is a type of policy where the value of the subject matter of insurance is agreed upon at the time of making the contract. The insurer has to pay a specified amount of value irrespective of the amount of loss caused due to fire. This type of policy can be taken for art work, painting, etc. where the value of damaged articles become difficult to assess/measures.

2.       Average Policy: -It is a policy which contains an average clause. If the subject matter is not insured as per the exact market value or undervalued, then the insurer is liable to pay that percentage of the loss for which it is insured. E.g. if a policy is taken for Rs 50,000 against the market value of Rs 1, 00,000. The loss incurred due to fire is Rs 40,000, then the Insurance company will pay Rs20,000 (50% of Rs 40,000)

3.       Specific Policy: -In case of specific policy, the property is insured for a specific sum irrespective of the market value. If there is a loss, the stated amount will have to be paid to the policy holder. But the actual value of the subject matter is not considered in this respect. E.g. a property of value Rs 1,00,000 is insured  for Rs 60,000 and the loss due to fire is Rs 30,000 then the insurance company will pay Rs 30,000 in full as compensation

4.       Floating Policy: -This policy can be taken for those goods which are lying in different localities or godown or warehouses since the quantity of goods lying at different places from time to time, it becomes difficult for the owner to take specific policy so businessmen and traders take fluctuating policy. Such a policy is usually taken under one sum and one premium for goods lying at different places.

5.       Comprehensive Policy: -Comprehensive policy covers all types of risks like fire, burglary, riots, explosions, strikes, etc. this policy is also called as all in one policy. This type of policy is not popular in India but very popular in the countries like UK, USA, etc.

6.       Excess Policy: -Excess policy is taken when the value of the stock in the market constantly fluctuates. In such an instance it is not advisable to take one policy of certain sum, but instead two policies can be taken.

7.       Reinstatement Policy: -This is a type of fire Insurance Policy where the insurer undertakes to replace the property or goods lost by fire. In this policy instead of paying compensation for the property lost by fire, the property is replaced. The rate of premium is higher in Reinstatement Policy.

8.       Blanket Policy: -Blanket Policy covers all fixed and current assets of the assured in one policy. Under this policy all the assets lying at different places are covered under one premium and one policy.

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