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EORUPA ACADEMY

Q. No. 27 (b): Define Fire Insurance? Discuss in brief various types of fire insurance.

F I R E

I N S U R A N C E

INTRODUCTION: Fire insurance is a contract of insurance whereby, the insurer undertakes, in exchange for certain premium to indemnify the insured from the loss of the matter caused by fire. A contract of fire insurance is contract f indemnity. Fire insurance is also a contact of umberrimae fidei i.e. the insured must have disclosed the material facts of the subjects matter before the insured. DEFINITION: The definitions are as follows: F. E. Perry: Fire insurance is contract of indemnity by which an insurance company undertakes to make good any damage or loss by fire to building or property during a specified time. R. P. Jones: Fire insurance is a branch of insurance which insures premises or goods against damage by the fire. F. R. Ryder: Fire insurance is a contract of indemnity under which and insurance company agrees in consideration of the premium paid to make good any loss or damage by fire during a specified time. ESSENTIALS OR PRINCIPLES OF FIRE INSURANCE The following are the essentials or principles of fire insurance: 1) 2) 3) 4) 5) 6) 7) Insurable Interest: The insured must have an insurable interest in the subject matter of policy when the loss takes place. Absolute Good Faith: There must be absolute good faith between two parties (insurer and the insured). The insured must disclose the actual facts to the insurer. Contract of Indemnity: Fire insurance is a contact of indemnity. Fire insurance amount is claimed after the loss has occurred. If there is no loss no claim will be accepted. Personal Right: A man whose name is mentioned in fire insurance contract he has a right to receive the insured need amount form the fire insurance company in case of loss. Direct Loss: In fire insurance it is also specified that loss by fire should be direct and fire should be immediate cause of loss. Particular Period: Description of property is also a part of the contract. The location of the property should be described in the fire insurance contract. Description of Property:

Prepared By: H.ABDUL REHMAN

0321-6485593

EORUPA ACADEMY
The fire insurance policy is for a particular (specified) period of time usually (generally for a year. 8) Premium: In fire insurance policy, the policy must mention the sum of insurance and also the rate of premium 9) Fire must be Accidental: The fire caused to the property must be accidental. Fire should not in any case be intentional. 10) Not Profit: A fire insurance policy holder cannot get an overvalued fire policy of his property. This will encourage the insured to get his property burned to ashes and then claim the full insured amount and make a profit out of it. TYPES OF FIRE INSURANCE POLICIES: Following are the main important policies of fire insurance. a) Single Policy: A single policy of fire insurance is taken out for a specified sum of amount. b) Special Policy: A Special policy of fire insurance the insurer undertakes to indemnify the insured for a stated amount sum whether the subject matter if fully insured or not. c) Valued Policy: In case of value policy of fire insurance, the insurer has to pay the full value of the subject matter (property) if it is lost by fire. So in value policy of fire insurance value of subject matter (Property is predetermined) d) Unvalued Policy: In case of specific policy of fire insurance the value of the property is not predetermined and in case of loss the value is computed by assessment. e) Specific Policy: In case of unvalued policy of fire insurance the subject matter (property is insured for a definite amount sum. In case of loss the stated sum amount will be paid to the policyholder. f) Average Policy: The policy, which contains an average clause, is known as average policy. According to average clause the insurer has a ration, that an insured value bears to the actual value of the subject matter (property) e.g. value of property = Rs. 10000 but is insured Rs. 5000. The property is burnt to ash (i.e. 5000) now, the amount to be paid by the insurer: Rs. {5000* } or 2500 {Ratio 5000/10000 or 1/2 } g) Floating Policy: The policy, which covers the risk of the different properties at several places, is known as floating policy. Big manufacturers whose goods are stored in different localities takes the floating policy. h) Loss of Profit Insurance Policy: This type of policy covers the loss of profit as a result of damaged caused by fire.

Prepared By: H.ABDUL REHMAN

0321-6485593