Fire Insurance & Marine Insurance

Unit 4
 What is a Fire Insurance?
 A fire insurance is a contract under which the insurer in return for
a premium Amount agrees to cover the insured for the financial
loss which the insured person may suffer due to destruction of or
damage to property or goods, caused by fire, during a specified
period.
 The contract specifies the maximum amount, agreed to by the
parties at the time of the contract, which the insured can claim in
case of loss.
 The loss can be ascertained only after the fire has occurred.
 The insurer is liable to make good the actual amount of loss not
exceeding the maximum amount fixed under the policy.
The types of losses covered by fire
insurance
 Lightning: Any lightning due to cloud burst may damage the property and
the same will be covered under the fire policy.
 Explosion / Implosion: Sudden change in the temperature in any plant &
machinery or exposure to atmospheric pressure may result into loss and the
same will be covered under fire policy
 Aircraft Damage: Any damage to the property due to any droppings by
aircraft or by itself will also be covered under the fire policy.
 Riot, Strike and Malicious Damage (RSMD): Any damage to the
property due to public or strike by employees or malicious damage
(intentional damage) by any person will be covered under this policy.
 Storm, Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood and
Inundation (STFI): The property damage due to any of these storms and
flood will also be covered under this policy.
 Impact Damage: Damage to the property due to impact by any Rail
/ Road vehicle or animal by direct contact, but not belonging to or owned by
the Insured or any occupier of the premises or their employees while acting in
the course of their employment.
 The types of losses covered by fire
insurance
➢ Goods spoiled or property damaged by water used to extinguish the
fire.
➢ Pulling down of adjacent premises by the fire brigade in order to
prevent the progress of flame.
➢ Breakage of goods in the process of their removal from the building
where fire is raging e.g. damage caused by throwing furniture out of
window.
➢ Wages paid to persons employed for extinguishing fire.
➢ Missile Testing Operations: Any loss or damage due to missile testing by
the Govt. or otherwise will be covered under this policy.
➢ Destruction or damage caused by Subsidence of part of the site on
which the property stands or Land slide / Rock slide.
 The types of losses not covered by a fire
insurance policy
 Loss, destruction or damage caused to the insured property by pollution
or contamination.
 Loss, destruction or damage directly or indirectly caused to the insured
property by nuclear peril.
 Loss, destruction or damage caused by war, and kindred perils.
 Loss of earnings, loss by delay, loss of market or other consequential or
indirect loss or damage of any kind or disruption whatsoever
 Earthquake: It is not covered under the fire policy but by paying
additional premium, the earthquake can be covered.
 Loss, destruction or damage to any electrical and / or electronic
machine, apparatus, fixture or fitting (excluding fans and electrical
wiring in dwellings) arising from or occasioned by over-running,
excessive pressure, short circuiting, arcing, self-heating or leakage of
electricity, from whatever cause (lightning included).
 The types of losses not covered by a
fire insurance policy
 loss caused by burning of property by order of any public
authority.
 loss by theft during or after the occurrence of fire.
 loss or damage to property caused by its own fermentation or
spontaneous combustion e.g. exploding of a bomb due to an
inherent defect in it.
 Types of Fire Insurance Policies
 Specific policy:- It is a policy which covers the loss up to a specific
amount which is less than the real value of the property.
 Comprehensive policy- It is also known as 'all in one' policy and
covers risks like fire, theft, burglary, third party risks, etc. It may also
cover loss of profits during the period the business remains closed due to
fire.
 Valued policy: - is a departure from the contract of indemnity. Under
it the insured can recover a fixed amount agreed to at the time the policy
is taken. In the event of loss, only the fixed amount is payable,
irrespective of the actual amount of loss.
 Floating policy:- is a policy which covers loss by fire caused to
property belonging to the same person but located at different places
under a single sum and for one premium. Such a policy might cover
goods lying in two warehouses at two different locations.
Types of Fire Insurance Policies
 Example: A person is having two godowns at Delhi and the
value of stock is Rs 50 lakhs and he is not having the value at
each location then he can insure the stock under floating
policy by paying an additional premium.
 Replacement or Re-instatement policy:- is a policy in
which the insurer inserts a re-instatement clause, whereby he
undertakes to pay the cost of replacement of the property
damaged or destroyed by fire. Thus, he may re-instate or
replace the property instead of paying cash. In such a policy,
the insurer has to select one of the two alternatives, i.e.
either to pay cash or to replace the property, and afterwards
he cannot change to the other option.
Settlement of Claims
 If there are any damage or loss arising due to fire then the
policy holder should immediately inform the insurance
company in writing and with estimated amount of loss.
 Survey Report: If the amount of loss is small (i.e. up to Rs.
20,000/-), the insurance company may depute an officer to
survey the loss and decide on the settlement of the loss on
the basis of the claim form and the officer’s report. However,
in large losses, an independent surveyor duly licensed by the
Government is appointed to give a report on the loss.
Settlement of Claims-Survey Report
 Cause of loss.
 Extent of loss.
 Under-Insurance, if any
 Details and value of salvage, and how it has been disposed of
or proposed to be disposed of
 Details of expenses (e.g. fire brigade expenses)
 Compliance with policy conditions and warranties.
 Details of other insurance policies on the same property, and
the apportionment of the loss and expenses among co-
insurers.
Settlement of Claims
 Claim form: The policy holder will submit the claim form with the
following information :
 Name and address of the Insured.
 Date of loss, time and place from where the fire started. (iii) Cause of
fire.
 Details of the property damaged such as description, etc. (v) Value at
the time of fire, value of salvage and the amount of loss.
 Details of other policies on the same property giving the name of the
insurer, policy number and sum insured.
 Fire Brigade report details.
 F.I.R. at the nearest police station regarding third party liability, if any
 Settlement of claim: On the basis of the claim form and the
survey report, decision is taken about the settlement or
otherwise of the loss.
Marine Insurance
 Marine insurance is an insurance provided to ships, boats and
most importantly, the cargo that is carried in them.
 Marine insurance covers the loss or damage of ships,
cargo, terminals, and any transport or cargo by which the
property is transferred, acquired, or held between the points
of origin and the final destination.
 Marine insurance is very important because through marine
insurance, ship owners and transporters can be sure of
claiming damages especially considering the mode of
transportation used
Types of Marine Insurance
 Hull Insurance
 Hull insurance is to protect the ship owner's
investment in the ship.
 It is basically a property insurance which covers
the ship itself, the machinery and equipment.
 Furthermore, the insurance covers some
liabilities, normally collision liability with
another ship and sometimes also liability for
colliding with other objects than another ship.
 Types of Marine Insurance

 Cargo insurance
 It covers physical damage to, or loss of your goods while in
transit by land, sea and air
 Cargo insurance can be taken for international as well as
domestic transportation.
 Land Cargo Insurance
 This insurance provides coverage for all the land transportations
covering trucks and other small utility vehicles.
 The coverage aspects are theft, collusion damages and other related
risks.
 This insurance is domestic in nature and normally, operates within the
boundaries of the nation.
Marine Cargo Insurance
 Open Cover Cargo Policies
 When insurance holder opts for coverage against various
consignments, then open cover cargo policies get activated.
 These policies are segmented in two categories namely
renewable policy and permanent policy.
 Renewable policy is required for a particular value requiring
renewal after policy expiration. Most of the single trip or
voyages fall under this category.
 Permanent policy can be drawn up for a decided time period
permitting countless shipments in that period.
Marine Cargo Insurance
 Specific Cargo Policies
 When a company approaches an insurance company or broker
for insuring a particular consignment, then it can fall under the
category of specific cargo policies.
 These policies are also termed as voyage policies because only
shipments are covered under them.
 Contingency Insurance Policy
 There are certain cases where customer, not the seller is
responsible for insuring the goods against loss or damage.
 There are perils associated with it if goods get damaged during
transit and customer refuses to accept them.
Marine Cargo Insurance
 Specific (Voyage) Policy :
 Although not the norm for cargo insurance, you may from time
to time need to approach an insurance company (or broker, or
other intermediary) to request an insurance policy for a
particular consignment. This is usually referred to as Voyage
Policy as the insurance covers only that specific shipment.
 Freight Policy
 Freight insurance indemnifies the ship owner for the loss of
earnings if the goods are damaged or lost and are not delivered.
Marine Insurance includes
 Cargo insurance which provides insurance cover in respect of
loss of or damage to goods during transit by rail, road, sea or
air.
 Thus cargo insurance concerns the following :
 export and import shipments by ocean-going vessels of all
types,
 coastal shipments by steamers, sailing vessels, mechanized
boats, etc.,
 shipments by inland vessels or country craft, and
 Consignments by rail, road, or air and articles sent by post.
 FEATURES OF MARINE INSURANCE
 Offer & Acceptance: It is a prerequisite to any contract. Similarly the
goods under marine (transit) insurance will be insured after the offer is
accepted by the insurance company.
 Payment of premium: An owner must ensure that the premium is
paid well in advance so that the risk can be covered. If the payment is
made through cheque and it is dishonored then the coverage of risk will
not exist
 Contract of Indemnity: Marine insurance is contract of indemnity
and the insurance company is liable only to the extent of actual loss
suffered. If there is no loss there is no liability even if there is operation
of insured peril. Example: If the property under marine (transit)
insurance is insured for Rs 20 lakhs and during transit it is damaged to
the extent of Rs 10 lakhs then the insurance company will not pay more
than Rs 10 lakhs.
 FEATURES OF MARINE INSURANCE
 Utmost good faith: The owner of goods to be transported must
disclose all the relevant information to the insurance company
while insuring their goods. The marine policy shall be voidable at
the option of the insurer in the event of misrepresentation, mis-
description or non-disclosure of any material information.
 Example: The nature of goods must be disclosed i.e whether the
goods are hazardous in nature or not, as premium rate will be
higher for hazardous goods. 5) Insurable Interest: The marine
 FEATURES OF MARINE INSURANCE
 Insurable Interest: The marine insurance will be valid if the person
is having insurable interest at the time of loss. The insurable
interest will depend upon the nature of sales contract.
 Example: Mr A sends the goods to Mr B on FOB( Free on Board)
basis which means the insurance is to be arranged by Mr B. And if
any loss arises during transit then Mr B is entitled to get the
compensation from the insurance company.
 Example: Mr A sends the goods to Mr B on CIF (Cost, Insurance
and Freight) basis which means the insurance is to be arranged by
Mr A. And if any loss arises during transit then Mr A is entitled to
get the compensation from the insurance company.
 FEATURES OF MARINE INSURANCE
 Contribution: If a person insures his goods with two insurance
companies, then in case of marine loss both the insurance
companies will pay the loss to the owner proportionately.
Example; Goods worth Rs. 50 lakhs were insured for marine
insurance with Insurance company A and B. In case of loss, both the
insurance companies will contribute equally.
 Period of marine Insurance: The period of insurance in the
policy is for the normal time taken for a particular transit.
Generally the period of open marine insurance will not exceed one
year. It can also be issued for the single transit and for specific
period but not for more than a year.
 Deliberate Act: If goods are damaged or loss occurs during
transit because of deliberate act of an owner then that damage or
loss will not be covered under the policy.
 FEATURES OF MARINE INSURANCE &
Types of Marine Insurance
 Claims: To get the compensation under marine insurance the
owner must inform the insurance company immediately so that the
insurance company can take necessary steps to determine the loss.