Fire insurance is a co-op erat iv e d ev ice t o sp read t h e l oss caused b y f ire

ov er a num b er of p ersons w h o are ex p osed t o it and w h o ag ree t o ensure

t h em sel v es ag ainst t h at risk

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Fire Insurance

Fire the term only says ‘destruction or device to

spread the loss’ .

Fire Insurance is a device to compensate

against loss due to Fire & other
occurrence
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What we’ll discuss …….. ?

Meaning

Causes

Risk coverage

Kinds of Fire Policies

Exclusions

Policy Conditions
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Causes of Fire

Physical Hazard – Inherent risk of fire which

may occur due to inflammable nature,
construction, artificial lighting, heating, lack of
extinguishing apparatus etc.

Moral Hazard – Destruction by man, either by

the owner or some other person, due to
willingness or carelessness

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Risks Covered

Fire

Lightning

Air craft Damages

RSMTD

STFI

Cyclone, Typhoon, Hurricane, Tornado

Impact damage

Subsidence, Landslide & Rockslide

Missile Testing Operation

Bush fire

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Risks Covered - Issues

General exclusions

Add on covers

Warranties

Conditions

Under insurance
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Exclusions/Add on covers

Architects, Surveyors & Consulting Engineers Fees (in
excess of 3% of the claim amount)

Debris Removal (in excess of 1% of claim amount)

Deterioration of Stocks in cold storage premises due
to failure of Electrical Supply at terminal ends of
Electric Service Feeders

Forest Fire

Impact damage due to insured’s own vehicles

Spontaneous Combustion

Earthquake (Fire & Shock)

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Kind of Fire Policies

Valued Policy

Valuable Policy

Floating Policy

Average Policy

Excess Policy

Reinstatement Policy

Comprehensive Policy
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VALUED POLICY

The property is valued at the inception of the policy.

The insurer pays the total admitted value
irrespective of the then market value.

The amount may be greater or less than the actual

market value.

Used for insuring pictures, sculptures, works of art,

jewellery, rare articles etc.

The insurer has to pay more than the actual loss if

the value of the property has gone down.

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VALUABLE POLICY

The amount of loss to be

determined at the market
price of the damaged
goods.

This policy truly satisfies

the doctrine of indemnity.

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FLOATING POLICY

Covers one or more types of

goods, at one time, under
one sum assured, for one
premium and in relation to
the same owner.

Useful to cover fluctuating

stocks in different locations.

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 AVERAGE POLICY

Policy containing “average clause”.

Amount of indemnity is determined Example:
with reference to the value of the
property insured. Value of property=
50,000/-
If the policyholder has taken policy Insurance= 30,000/-
for lesser amount than the actual Damage=20,000/-
value, the insured will be deemed to
Claim =
be his own insurer for the amount of
under insurance. insured amount / value
of property x actual loss
Clause is operative in case of =
underinsurance. 30000/50000*20000 =
12000
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 EXCESS POLICY

o Suits to those businessmen whose stock fluctuates from time to time.

o He takes, in this case, two policies. (First Loss Policy and
Excess Policy).

o The First Loss Policy covers the level below which the stock
never goes.

o The Excess Policy covers the stock in excess of the minimum

stock level.

o The premium is charged on the average monthly excess stock,

premium for which is very nominal.
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REINSTATEMENT POLICY

o Issued to avoid the conflict of indemnity.

o In other types of policies, the market value or the depreciated
value of the loss is indemnified. The amount of indemnity will be
lesser than the replacement value.
o In order to cover the full loss, reinstatement or replacement
policies are issued.
o In case of loss, the damaged property is replaced.
o Such policies are usually issued against building, plant and
machinery.
o Not issued against stock or merchandise

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COMPREHENSIVE POLICY

o Covers full protection not only against risk of fire, but also against
burglary, riot, theft, damage from pest, lightning etc.

o It does not mean that the insured will get all types of risk.
o There may be many exclusions and limitations.
o Suits both the insurer and the insured.
o Insurer gets higher premium and the insured gets several types of
coverage at affordable cost.

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 Implied Conditions
EXISTENCE O F P R O P ER TY - T h e s u b j e c t m at t e r
s h o u l d e x i s t at t h e t i m e t h e p o l i c y i s e f f e c t e d .
INSU R ED P R O P ER TY - T h e f ir e m u s t o c c u r to
th e in s u r e d p r o p e r ty .
INSU R A B L E INTER EST - I n s u r ab l e i n t e r e s t m u s t
c o n tin u e fr o m th e tim e o f c o m m e n c e m e n t o f
r i s k t i l l t h e c o m p l e t i o n o f c o n t r ac t .
G O O D F A ITH – t h e i n s u r e d m u s t d i s c l o s e al l
m at e r i al f ac t s an d t ak e r e as o n ab l e c ar e t o
p r e v e n t an d e x t i n g u i s h t h e f i r e .
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Express Conditions
A L TER A TIO NS - T h e c o n t r ac t i s v o i d ab l e i f t h e r e i s an y al t e r at i o n
t o t h e p r o p e r t y af t e r t h e c o m m e n c e m e n t o f b u s i n e s s .
•If th e in s u r e d p r o p e r ty is r e m o v e d w ith o u t th e c o n s e n t o f th e
i n s u r e r , t h e c o n t r ac t i s v o i d ab l e . E x am p l e – F u r n i t u r e s h i f t e d
f r o m r e s i d e n t i al h o u s e t o f ac t o r y ( i n c r e as e o f r i s k ) .
• I f t h e r e i s an y as s i g n m e n t o r t r an s f e r o f i n t e r e s t , t h e c o n s e n t
o f i n s u r e r h as t o b e o b t ai n e d . O t h e r w i s e , t h e c o n t r ac t i s
v o i d ab l e .
• I f t h e as s i g n m e n t o r t r an s f e r d o e s n o t i n v o l v e g r e at e r r i s k o r
h az ar d , t h e i n s u r e r u s u al l y g i v e s t h e c o n s e n t .
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Express Conditions
EXCL U SIO NS – C e r t ai n r i s k s ar e e x c l u d e d u n d e r
a f i r e p o l i c y b y i n s e r t i n g a c l au s e i n t h e p o l i c y
d o c u m e n t.
• D am ag e b y e x p l o s i o n m ay b e e x c l u d e d .
H o w e v e r , i f i t i s d am ag e d b y f i r e t h at f o l l o w s
e x p l o s i o n , t h e c l ai m i s al l o w e d .
• M o n e y , s e c u r i t i e s , s t am p s , d o c u m e n t s ,
m an u s c r i p t s e t c . ar e al s o e x c l u d e d u n d e r
n o r m al c i r c u m s t an c e s .
• T h e ab o v e e x c l u s i o n s c an b e c o v e r e d b y
p ay i n g e x t r a p r e m i u m . 18
 Express C o n d i t i o n s

EX C L U S I O N S –

- A f i r e i n s u r an c e p o l i c y d o e s n o t c o v e r t h e f i r s t
R s .1 0 ,0 0 0 ( o r as ap p l i c ab l e ) o f e ac h an d e v e r y c l ai m .

- L o s s e s ar i s i n g o u t o f w ar an d al l i e d p e r i l s , t h e f t ,
w i l l f u l ac t o r g r o s s n e g l i g e n c e , l o s s o f e ar n i n g s , l o s s t o
b u llio n , d o c u m e n ts , c u r r e n c y e t c . f o r an am o u n t
e x c e e d i n g R s . 1 0 ,0 0 0 , u n l e s s e x p r e s s l y s t at e d .

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 Express C o n d i t i o n s

P O L I C Y EX C ES S –

- 5 % of every claim resulting from Lightning,

Storm, Tempest, Flood and Inundation,
Subsidence and Landslide

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Express Conditions
F R A U D S –

• F r au d f o r f e i t s al l t h e b e n e f i t s u n d e r
ap o lic y .
•T h e re ar e th re e p o s s ib ilitie s -
.f r au d u l e n t c l ai m , u s e o f f r au d u l e n t
m e an s an d ac t s o f w i l l f u l d e s t r u c t i o n .
• F al s e v al u at i o n c o m e s u n d e r f r au d .

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Express Conditions
CL A IM S – T h i s c l au s e l ay s d o w n th e c o n d itio n s
r e l at e d t o t h e c l ai m o f l o s s b y f i r e .
• N o t i c e o f l o s s t o b e g i v e n i m m e d i at e l y , t h o u g h
d e t ai l s c an b e g i v e n t h e r e af t e r .
• E x p e n s e s o f c l ai m s t o b e b o r n e b y t h e i n s u r e d .
• T h e i n s u r e d m u s t f u r n i s h al l d e t ai l s ab o u t t h e
p ro p e rty .
• H e m u s t g i v e al l n e c e s s ar y p r o o f s al o n g w i t h a
s t at u t o r y d e c l ar at i o n r e g ar d i n g t h e t r u t h o f t h e
c l ai m . 22
Express Conditions
R EINSTA TEM ENT –
• T h e i n s u r e r r e s e r v e s t h e r i g h t o f d i s c h ar g i n g h i s
l i ab i l i t y b y r e i n s t at i n g o r r e p l ac i n g t h e g o o d s i n s u r e d
i n s t e ad o f c as h p ay m e n t .
• I t i s o p t i o n al w i t h th e i n s u r e r an d n o t w ith th e
in s u r e d .
• T h i s c l au s e r e m o v e s t h e d i s p u t e b e t w e e n t h e
i n s u r e r an d t h e i n s u r e d i n c as e o f o v e r -v al u at i o n o f
c l ai m s .
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Express Conditions
A R B ITR A TIO N –

• T h i s c l au s e p r o v i d e s f o r t h e ap p o i n t m e n t o f
ar b i t r at o r ( s ) b y b o t h t h e p ar t i e s j o i n t l y , i n c as e
o f an y d i s ag r e e m e n t o v e r t h e am o u n t o f l o s s
o r d am ag e .
• I t i s m e an t t o av o i d u n d u e l i t i g at i o n an d
s e t t l e t h e c l ai m b y ar b i t r at i o n .
• I t i s a s i m p l e , c h e ap an d q u i c k m e t h o d o f
s e ttlin g d is p u te s .
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Express Conditions
CO NTR IB U TIO N CL A U SE –
• T h i s c l au s e c l ar i f i e s t h at i f t h e r e ar e m o r e t h an
o n e i n s u r e r , al l o f t h e m w i l l i n d e m n i f y ac c o r d i n g
t o t h e i r p r o p o r t i o n s t o t h e t o t al i n s u r an c e .

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 Express Conditions
A V ER A G E CL A U SE –
•T h is c l au s e p r o v i d e s t h at t h e l o s s
w ill b e p ai d i n p r o p o r t i o n t o t h e
in s u r e d am o u n t an d t o t al am o u n t o f
p ro p e rty .

CLAIM = LOSS x AMOUNT OF INSURANCE

AMOUNT OF THE PROPERTY

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