Fire Insurance: Meaning, Coverage, Types, Objectives, & Claim Process

Fire insurance is a type of property insurance that provides financial protection against losses or damages caused by fire. In India, this insurance policy is essential coverage for individuals and businesses as it can help to protect their assets and mitigate the financial impact of fire-related incidents. Let’s learn more about this insurance policy in detail.

What is fire insurance?

Fire insurance is a type of property insurance, meaning it covers losses or damages caused by fire. It can provide financial protection for a wide range of assets, including buildings, equipment, inventory, and personal property. In the event of a fire, the insurance company compensates the policyholder for their losses, up to the limits of the policy.

Why is fire insurance coverage important?

Unfortunately, fire-related incidents are quite common in India, due to a variety of reasons, such as electrical malfunctions, manmade and natural disasters, and so on. These incidents can result in significant financial losses for individuals and businesses, as well as damage to property and assets. One of the objectives of fire insurance is to help you mitigate the financial impact of these incidents and provide financial protection against the damages. Additionally, fire insurance is also mandatory in India for certain types of businesses, such as those involved in the storage or handling of hazardous materials. This is to ensure that these businesses have the necessary financial resources to respond to fire incidents and protect everyone from potential harm.

Types of fire insurance policies in India

The following are the types of fire insurance policies that are available in India: 1. Valued policy: A predetermined value is given for an item or property by the insurer in this policy. Since the value of a property or an item that has been damaged in the fire cannot be ascertained, the insurer fixes their value in advance at the time of purchase of the policy. During the time of claim, it is this predetermined amount that is paid to the policyholder. 2. Average policy: In this policy, you as the policyholder can have the insured amount to be less than the actual value of your property. If the value of your property is Rs.30 Lakhs, you can set the insured value at Rs.20 Lakhs. The compensation amount will not exceed this level. 3. Specific policy: The compensation amount in this policy is fixed. For example, if the damaged item was worth Rs.5 Lakhs and the coverage of the policy is Rs.3 Lakhs, you would receive only Rs.3 Lakhs as that is the maximum amount of compensation offered under the policy. However, if the amount of loss is within the coverage amount, you get full compensation. 4. Floating policy: In this policy, you as a business owner can secure more than one property of yours under its coverage. If your properties are in different cities, the policy will cover all of them. 5. Consequential loss policy: If vital machinery and equipment of your business get damaged in a fire, you would get compensated for those losses in this policy. This policy ensures that your business does not remain shut for long due to the loss of machinery. 6. Comprehensive policy: This policy offers extensive coverage. It offers coverage not only against damage caused by fire but also against the damage which may happen due to natural and manmade calamities. It also covers damages and loss caused due to the theft*. 7. Replacement policy: In this policy, if your property gets completely damaged, you are compensated either with the depreciated value being considered. Or you are compensated as per the actual value of your property. Always make sure to know the purpose for which you are buying the policy and choose the fire insurance coverage accordingly.

What are the inclusions and exclusions?

Listed below are the inclusions and exclusions of this type of general insurance coverage*: Inclusions:

1. Loss of valuable property due to fire
2. Loss of goods due to fire
3. Cost of temporary accommodation due to damage to your property
4. Amount compensated to the firefighting servicemen
5. Fire caused to short-circuit or faulty connection

Exclusions:

1. Fire caused due to emergencies such as war, rioting, or earthquake
2. Fire caused due to ill intentions
3. Fire caused during the burglary

Some policies also provide coverage for other types of losses, such as loss of rent or damage to third-party property. Policyholders need to understand the specifics of their policy and the types of losses that it covers.*

Conclusion

As one can  see, a fire insurance policy can provide financial protection against losses or damages caused by fire and mitigate the financial impact of fire-related incidents. If you wish to get financial coverage for your property not just from fire, but also from other factors, you can also consider opting for home insurance to safeguard your property and the valuables in it.     *Standard T&C apply Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.