THE IMPORTANCE OF TAKING UP A FIRE INSURANCE COVERAGE

 FIRE INSURANCE: (DEFINITIONS, COVERAGE AND PERILS)

FIRE INSURANCE (ALL ABOUT FIRE INSURANCE FOR DUMMIES)

A fire insurance is a contract under which the insurer in return for a consultant (Premium) agrees to indemnify the insured for the financial loss which the latter may suffer due to destruction of or damage to property or goods caused by fire during a specific period 

Take note: Under fire insurance, the damage/loss caused by fire should be accidental not intentional.

Anything damage caused by fire under fire insurance, it is covered by fire insurance in understanding terms, fire insurance is that kind insurance covering damages or losses caused by fire. This insurance has to do with or cover for cost of replacement repair or reconstruction of property above the limit set by the property insurance policy.

Some standard homeowners insurance policy includes coverage for fire. If excluded, fire insurance may need to be purchased separately especially if the property contains valuable items that cannot be covered with standard insurance coverage. The insurance company’s liability is limited by the policy value and not by the extent of damage or loss sustained by the property owner’s.

The purpose of fire insurance is to make good the financial loss suffered as a result of the fire. It isn't the duty of fire insurance to replace the economic loss that caused the fire waste. Some insurable properties are buildings, electrical installations, contents of building such as machines plant and equipment accessories. In more terms, fire insurance is a policy enacted to compensate the insurer for loss caused by fire that is: when the damage is caused, the insurer shifts the burden to the insurance policy.

What does fire insurance covers:

a. Destruction or damage by fire when fire goes outside its normal limits.

b. Fire caused by unlawful person who have no idea about the agreement of the insured.

c. Damage caused by fire brigade while fighting the fire.

d. Damage cause by falling walls or part of a building in which a fire takes place.

What does fire and special perils insurance cover:

1.  Fire– Fire, lightening, explosion (domestic)

2.  Natural perils– Storm, flood, earthquake, subsidence, landslide

3.  Social peril –Malicious damage, riot, strike, civil commotion.

4.  Chemical peril– Explosion, spontaneous, combustion, self-healing.

5. Miscellaneous– Escape of water, sprinkler leakage, impact damage – Vehicles, Animal and devices.

Fire insurance is a good idea if:

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1.   The value of your properly exceeds what your insurance company will cover for you.

2.   Fire is very common where you live and you need that little extra piece of mind.

The following policies are generally issued for fire insurance:

• Valued policy, 
• Specific policy, 
• Average policy, 
• Floating policy, 
• Comprehensive policy, 
• Consequential loss policy, 
• Replacement policy.

1.   Valued policy: This is the value of the subject matter’s agree upon at the time of taking up the policy, the insurer agrees to pay a pre-determined amount if the property in question is damaged or consumed by fire. The agreed cost may be higher or lesser than the value in the market as at the time of loss.

2.   Specific policy: This policy cover risk of a specific amount. In case of loss of property, the insurer will pay the loss if it is less than the specific amount. For example if the insurance policy is taken for $10,000 and the value of the property is $30,000 if the property worth $20,000 is lost, the insured will get the whole amount of loss. If the loss is up to $10,000 it will be paid in full.

3.   Average policy:   Average clause is added to penalize the insured for a lesser sum that the value of the property.

4.   Floating policy:   A floating policy is taken up to cover the risk of goods lying at different places but these goods should belong to a single person and only one policy will cover these goods. This policy is mostly effective to business men who engage in import and export of goods and these goods lie in different warehouse at different places.

5.  Comprehensive policy: This policy covers all types of risks including fire explosion, lightening, burglary, riots, labour, disturbance etc. this is referred to as  all-risk policy or comprehensive policy.

Consequential policy:   This is a type of policy that covers up loss of profits or consequential loss. The calculation of loss of profits is on the of loss of sales basis. You could take a separate policy for these standing charges.

7.  Replacement policy:     A replacement policy covers the compensation of a property loss or damaged along to the replacement price. The new asset must be just like the one which had been lost . The amount of compensation will depend the market price of the new asset so that it is replaced without additional cost additional cost be insured.