Features of Fire Insurance Policy

As a property insurance type, fire insurance provides coverage for damages or losses caused due to fire. It serves the purpose of financially protecting your assets, ensuring you recover from a fire incident with very little financial damage.

Owning a fire insurance policy implies your ability to protect your property from the unanticipated and potentially damaging effects of fire. With this coverage, you can return to normal functionality or resume operations without delay after being affected by a fire incident.

Features of Fire Insurance Policy

The following are the features of fire insurance which will help you better understand this policy and how it can benefit you.

Good Faith Principle

The principle of utmost good faith governs the contract of fire insurance that you and the insurer enter into. Before you own a fire or burglary insurance policy, you must disclose all important points related to the insurance policy, as it will help the insurer calculate the risks involved.

If you do not furnish all the details properly, the insurer can terminate the contract if necessary. The same rule applies to the insurer, who is supposed to provide you with all the policy details without hiding any charges or clauses.

Insurable Interest

When opting for a fire insurance plan, the insured individual should have an insurable interest in the property that the insured wants to insure. Here, insurable interest implies that the insured individual should benefit from the insured things that survive the fire and suffer from the loss of those insured things.

Contract of Indemnity

One of the fire insurance features is that a contract of indemnity is signed between the insured and the insurer. Under this contract, the insurer has to provide reimbursement for the original damage or loss caused by fire, up to the total sum insured. There is no way to profit from the insurance claim. Moreover, the insurer can deduct the property’s salvage and depreciation value from your claim amount.

Personal Right

Again, when it comes to fire insurance policy advantages, it is the personal right of the insured individual to claim reimbursement for the loss/damage caused by the fire incident. Without the insurer’s agreement, the insured individual cannot pass on this right to anyone else. It is also the right of the insured individual to sue the insurance company for breaching the insurance contract in case the insurer is unable to pay the claim amount.

Personal Insurance Contract

Based on the relationship between the insured and the insurer, the fire insurance contract becomes a personal insurance contract. As the insured, you do not have the right to transfer this policy to another individual without the insurance provider’s consent. The policy will terminate automatically if you transfer the rights or sell your insured property to another individual.

Direct Loss from Fire

One of the fire insurance benefits is that the damage or loss must be caused directly and immediately by fire. Examples of direct loss because of accidental fire would include damage to contents and tangible property within the insured building.

Direct loss from the fire may also include the damages sustained by the building contents due to water spray while the firefighters try to extinguish the accidental fire.

Property Description

A fire insurance contract’s important part includes a mention of the property location in the fire insurance policy document. Additionally, when settling a claim, the insurance company will provide claim compensation only if the accident takes place at the insured location.

Property Valuation

The value of the insured property in fire insurance policies is based either on replacement value or market value. The amount necessary to replace the lost or damaged property with a new property of the same quality and kind is known as the replacement value.

On the other hand, market value refers to the amount the insured property would be priced at the time of damage or loss in the open market.

Property Coverage

This policy covers property damage and loss due to fire and other associated risks. The property generally covered under this policy includes goods in transit, buildings, furniture, machinery, raw materials, stock and fixtures. You can select the extent and type of property coverage based on your preferences and needs.

Conclusion

Other features of fire insurance include the policy premium determination based on different factors and the limits and deductibles for the policy that affect the coverage scope and claim amount.

Now that you know the features of a fire insurance policy, it will be easier for you to find the right coverage for your property so that you can avoid financial loss due to fire.