Types of Fire Insurance Policy

Valued Policy

Under Valued Policy, the value of a subject matter is decided, upon which the insurer pays if it is destroyed or damaged. This policy doesn’t work on the principle of indemnity. The agreed value that is compensated can be more or less than the market price. This policy is designed for the goods and properties which actual value can’t be decided after their damage or loss. Usually, the work of art, jewellery, paintings, crafts etc. come into this category.

Specific Policy

This policy paid up to the specific amount the risk is insured. In case of a fire loss, the insurer will pay for the loss that is less that the specific amount or up to the sum insured. Let’s say, a policy is taken to cover a property worth value Rs. 80,000, for sum insured Rs. 50,000. When the property sees a loss of Rs. 40,000, the insurers have paid the full amount. If the loss is up to Rs. 50,000, the full amount will be paid. But if the loss exceeds Rs. 50,000, the insurer will pay up to the insured amount. However, the insured isn’t penalised for availing a policy for a lesser amount, as the value of the property is not taken into consideration.

Average Policy

When an average clause is applicable to fire policy, it is called Average Policy. This clause is used to penalise the policyholder for taking up a policy with a lesser amount than the actual value of the property. The compensation amount is proportionately reduced in case the value of the policy is less than the insured property. Let’s say if you own fire insurance of worth Rs. 20,000 when the value of your property is Rs. 30,000. In case of fire damage of around Rs. 50,000, the insurer will pay you up to Rs. Rs. 10,000 (20,000/30,000 x 15,000) and not Rs. 15,000. It discourages the policyholder to get an under-valued policy.

Floating Policy

This policy is tailor-made for the businessmen who deal in import and export businesses. The floating policy is taken to cover the goods of an organisation lying at the different places, provided the goods should belong to one person. The premium charged is the average premium that would have been paid, in case a specific policy would have been taken for all these goods. The insurer may put its own clause and conditions.

Comprehensive Policy

By opting for a comprehensive policy, the insured can be well assured for fire, explosion, lightning, burglary, riots, labour disturbances etc. A single policy covers multiple risks, thus, comprehensive insurance is highly recommended.

Consequential Loss Policy

Due to a fire incident, factory works will be at a halt. Production will go down despite the fixed expenses continue at the same rate. With a consequential loss policy, all these losses can be covered. This policy pays the policyholder for the loss of profit by calculating the compensation on the basis of loss of sale.

Replacement Policy

Under this policy, the insurance providers assure compensate for the loss on the basis of the market value of the property. Thus, the amount to be compensated is calculated after considering the depreciation value of the property. The policy ensures that the compensation will be on the replace price. So, the new asset will be of a similar price that has been lost. As the compensation will be on the market price of the new assets, it is replaced without an additional expense.

Criteria

• The policy offers coverage for any damages or losses caused to the fire.
• Insured will get coverage for expenses incurred due to damage by explosion or implosion.
• Damages caused by the lightning are covered under fire insurance online.
• Damages or losses caused by an explosion are also covered by fire insurance policy.
• Fire and any other losses or damage caused by aircraft or other airborne devices, damage due to articles dropped by an aircraft is covered by fire insurance policy.
• If the belongings or properties or of the insured are damaged caused by strike, riot or any terrorist activities, then it will be covered by fire insurance policies.

Exclusions of Fire Insurance