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Introduction of the Host
Mr.Harikumar is a freelance journalist with rich experience gained from working with leading periodicals and dotcoms. His association with leading financial portals has contributed greatly to his ability to deal with classroom sessions in the financial sector, especially investments. Currently, he is a columnist with some of the well known publishing companies. Some of his published works on mutual funds and insurance have got wide acclaim.

FIRE INSURANCE

Need for Fire Policy
Every structure, house, or organization is vulnerable to fire. The damage could be so extensive that the replacement of the damaged property may take the owner of the building to rack and ruin. This has prompted many to take enough measures to prevent their property from fire. Fire can be fought to certain extent. But beyond it, one needs an outside protection or cover, which only an insurance company can provide. For any property to come under the policy, fire should be accidental. The properties to be insured can be buildings, plant and machinery, furniture, fixtures, etc. in which the person who insures has an insurable interest.

Scope
A fire insurance policy or otherwise known to be Standard Fire and Special Perils Policy does not only cover fire, but also explosion, lightning and natural calamities like earthquakes, flood, riots, cyclone, etc. But natural heating or combustion are not covered hereunder. Damage occurred while putting out, suppressing or minimizing the loss caused by the fire also would be covered under the policy.

Fire Insurance is essentially a contract of indemnity. That is, the insured will make good the loss to the insured only to the extent the property is damaged or the insured amount whichever is less. For example, if a person has insured his house for Rs.50,000-, the insurer is not liable to pay the full loss, although, the loss may be higher than the insured amount. The insurer will keep his liability within the insured amount.

Exclusions
Some of the exclusions under Fire Policy are the following:

1. Pollution and contamination damage other than that which itself results from a peril covered under the policy.

2. Destruction or damage to bullion or unset precious stones, any curios or works of art for an amount exceeding Rs.10,000/-,

3. Documents or other stationery unless specifically mentioned in the policy.

4. Five per cent of claim resulting from natural calamities.

5. Short circuit, or leakage of electricity.

6. Loss by theft during or after fire.

7. Loss to the property by natural heating or drying process

8. Burning of property by order of any Public Authority or Subterranean Fire

9. Loss caused by nuclear weapons or ionizing radiations.

The insurers will not be liable for any misrepresentation or twisting of facts made by the insured while taking the policy. However in the case of fall of building, the policy can be modified at the instruction of the insured if the building has collapsed and the insurer is informed of this, within seven days of the incident, seeking such building to be covered.

In India, Fire Insurance business is governed by the All India Fire Tariff which prescribes the terms and conditions as well as the premium.

Types of Policies
Generally, there are three types of fire policies issued by insurance companies in India

Type A: Comprehensive package for simple risks:

Type B: Restricted Package for simple risks

Type C: Restricted Package for Industrial Manufacturing and storage risks.

Term of the Policy
Except for Flats and Houses, fire policy is taken for only one year, subject to renewal. In exceptional cases, short term policies also are issued by loading premium. The fire policy starts operational as soon as the cover note or deposit receipt is issued to the insured. The insurance cover is valid from inception of the contract till midnight on the date of expiry of the period of insurance stated in the policy

Premium
The amount of premium varies according to the degree of hazard or risk involved. Normally days of grace for the payment of premium will be allowed only if the person having insurable interest intends to renew the policy.

Fire Policies can be any one of the following types

Re-instatement or replacement policy
Essentially, any insurance policy is taken to maintain the status quo. As such, under this policy, one can resort to the option of stating the value of the property to be the cost of replacement of such property, not the present value. Here the insurers can choose, as agreed upon, to reinstate the property instead of paying in cash.

Valued Policy
Under the policy, the insured can recover a fixed sum as agreed upon at the time of taking the policy. Here, the actual loss is not taken to books. It is the actual value stated in the policy, irrespective of the loss. Therefore, no valuation of the property is required to satisfy the insurer.

Consequential Loss Policy or Loss of Profit Policy
Loss of profit policy, as the term suggests, is taken for the loss of profit for the insured during the period from the occurrence of fire till the date when the property is replaced. The loss of profit includes rent, tax, electricity charges, and all other standing charges which the insured has to pay irrespective of the damage to property.

Claims Procedure
Consequent to the loss by fire, the claim procedure commences. The conditions for claim are the following:

1. Immediate notification of loss cause by fire, to the insurer

2. Submission of a written statement of the claim within 15 days of loss, giving full particulars of loss and the details of other insurers covering the property against the same risk.

3. Submission of all reasonable information, proof and other documents in respect of the loss at the insured's expense

4. Declaration of oath furnished about the truth of the details.

5. The recovery of damages is subject to average clause; i.e., the insured has to bear a portion of the amount of damage over and above the insured amount.

If the insurer is not intimated about the loss by fire within 6 months from the date of incident, the claim may not be considered. Similarly, the insurer will be automatically absolved from any liability, if the loss is not intimated within 12 months of the cause of incidence, unless the matter is sub judice.