Fire incidents in India continue to make headlines despite the best measures taken. Over the years, several big fires have claimed lives and damaged properties in different parts of India. While the emotional trauma from any fire accident takes time to heal, the financial repercussions can be mitigated greatly with a fire insurance policy. Read on to know the fire insurance meaning and its various aspects.
Fire insurance is a type of general insurance policy that offers protection against damages caused by fire. Through this policy, individuals and businesses can protect their assets and minimise the financial impact of fire-related incidents. With a fire insurance policy, you can cover a wide range of assets from the financial losses caused by fires. These include buildings, personal property, inventory, and equipment. In the event of a fire, the insurance company compensates you for the losses suffered as per the policy's terms and conditions.
Now that you know the meaning and definition of fire insurance, let's see the various types of fire insurance policies available. They are:
Valued Policy
Under this policy, the insurer assigns a predetermined value to an item or property. In other words, the insurer fixes the value in advance at the time of policy purchase. This fire insurance policy doesn't work on the indemnity principle. A valued policy is designed for properties whose actual value can't be decided after their loss or damage.
Specific Policy
As the name suggests, this policy offers a fixed compensation amount. For instance, if the damages caused are worth Rs 3 lakhs and the policy's coverage is Rs 2 lakhs, you will receive only Rs 2 lakhs as compensation. That said, you will get full compensation if the loss amount is within the coverage amount.
Average Policy
In an average fire insurance policy, the compensation amount is proportionately reduced if the policy's value is less than the property's value. For instance, if your property's value is Rs 10 lakhs and you set the insured value at Rs 5 lakhs, the compensation amount will not exceed Rs 5 lakhs.
Floating Policy
Through this fire insurance policy, you can secure more than one property. If you own different properties in different cities, you can cover them all through a floating fire insurance plan. This type of policy is more suitable for business owners who own multiple properties.
Comprehensive Policy
A comprehensive fire insurance policy offers extensive coverage. It not only covers damages caused by fire but also natural and man-made calamities such as explosions, lightning, riots, theft, etc. This policy covers multiple risks.
Consequential Loss Policy
If vital business equipment or machinery is damaged in a fire, a consequential loss policy offers the required compensation. It ensures that production doesn't remain shut for an extensive period due to the loss of critical machinery.
Replacement Policy
If your property is completely damaged by fire, this policy compensates you with the depreciated value or the property's actual value.
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You need to consider certain essential things before buying a fire insurance policy. These include:
Understanding the Type of Policy You Want to Purchase
Before purchasing, you must understand the type of policy you want to purchase. As different fire insurance plans have different coverage, you need to know the purpose for which you need the policy and choose a plan accordingly.
Reading the Inclusions and Exclusions
This is another critical consideration. Go through the list of inclusions and exclusions thoroughly. Every fire insurance plan has certain inclusions and exclusions. Inclusions are instances under which you'll receive coverage from your plan, while exclusions are instances when you will not receive coverage. A holistic understanding of the inclusions and exclusions can help you avoid claim rejection.
Knowing the Insurer's Claim Settlement Ratio
Equally important is to know the claim settlement ratio of the insurer. Go for an insurer who has a high claim settlement ratio. This enhances the chances of your claims being settled on time. Insurers publish this ratio on their websites.
Understanding the Claims Process
This is another vital consideration. You need to understand the claims process thoroughly. Check with your insurer on how to go about claims when needed. A holistic knowledge of the claims process helps quickly file claims and get compensation.
Getting Optimum Coverage
Ensure you have optimum coverage from your policy. Compute the value of goods and choose coverage accordingly. If you opt for less coverage, it could lead to out-of-pocket expenses. Hence, opt for an adequate cover.
It's difficult for anyone to predict how destructive a fire could be. A fire insurance policy helps you shield against the financial impact due to fire. Buy this policy at the earliest to safeguard your finances and valuable property.