Importance of Fire Insurance In Human's Life

Fire Insurance Importance for Human's Life

A contract of fire insurance is a contract by which the insurer undertakes, for a consideration in the form of a payment of money either in lump sum or installments, to indemnify the insured against the consequences of a fire, or the loss or injury as arising therefrom during an agreed period and up to a certain amount. The contract is to be found embodied in a document known as the "policy of the fire insurance " and usually for a period of one year and renewed each year.
A few notable definitions are reproduced below :

• A contract whereby the insurer in consideration of the premium paid undertakes to compensate the insured for any loss that may result due to occurrence of fire .

• Fire Insurance is a contract of indemnity against loss or damage to property arising from fire during  an agreed period of time. Here the insurer undertakes to indemnify the insured against financial loss caused directly as a result of fire.

• A contract of fire insurance is a contract by which the insurer undertakes, for a money consideration, to indemnify the insured against the consequences of a fire during an agreed period up to the amount stated in the policy.

Fire : The term "fire" is a contract of fire insurance is used in its popular and literal sense. It means the production of light and heat by combustion. Combustion occurs only at the actual ignition point. Hence, there is no fire without ignition. Loss or damage which occurs as a result of putting out the fire would also be covered by the fire risks. Fire policies are not covered through fire caused by earth quakes, riots, civil commotion, foreign enemy, rebellion etc.

Example: A, B, and C are three continuous houses insured against fire. An earthquake caused A to fall and as a consequence fire broke out and spread to B where an explosion occurred whereby C was wrecked.

In the insurer liable for the loss caused to C ?
Answer : Fire risks don not cover loss caused only by explosion. However, where explosion actually causes ignition which spread into fire, the loss would be taken as a loss by fire. A simple fire insurance, policy covers loss by explosion incidental to fire unless specifically excluded.
In the instant case, the insurer will be liable for the loss caused to house C if

 (i) the explosion was caused by fire and
 (ii) the insurer has not excluded his liability for explosion by a special clause in the fire policy.

Fundamental Principles of Fire Insurance For home Owners

Fundamental Principles of Fire Insurance

The following are the essential principles essential for a valid contract of fire insurance.
A contract of indemnity : Its object is to place insured as far as feasible in the same financial position after a loss as that occupied immediately before the loss. The insured can recover only the amount of actual loss subject to the sum assured.

Insurable Interest : In fire insurance the insurable interest must exist at the time of effecting the insurance as well as at the time of the loss. The interest, however, may be legal or equitable or may arise under a contract of purchase or sale.

The following have been held to have insurable interest in the subject material :
Owner
Mortgagee
Trustee
Executor
Ware houseman
Common
Bailey
Pledge
Person in lawful possession
Finder
Insurer

Commission Agent where the agency is coupled with interest &
Tenants who are liable to pay rent after a fire.It ought to however, be noted that persons can insure only to the extent of such limited interest.

Contract of Nice Faith : The contract of fire insurance is a contract of Uberrimae Fidel i.e., a contract based on absolute nice faith, & therefore, the insured must make full & detailed disclosure of all material facts likely to affect the judgement of fire officials in determining the rates of premium or deciding whether the proposal ought to be accepted. The description of the property, when asked for, ought to be correctly give, & all knowledge that may be necessary as to the class of goods & articles that are kept on the premises or in the surrounding neighborhood, ought to be exactly supplied.
Loss Through Fire : Loss resulting from fire of some other cause which is the proximate cause is the risk covered under a fire insurance contract. But where the fire is caused by the insured himself or along with his connivance or by the operation of a peril specifically excluded under the policyowner like earthquake, the loss won't be covered.

A Contract from Year to Year : A fire insurance policy owner is usually for year only and can be renewed after that.

Principles of Abrogation and Contribution: Abrogation is a doctrine applicable to both fire and marine insurance by which the insurer or underwriter, becomes entitled to on his paying compensation to the insure, to claim the advantage of every right of the insured against third parties who may be proved to be responsible for that loss, owning to such third parties negligence, default etc.

Where the subject material has been insured with over insurer, each insurer has to meet the loss only rate-ably. If he's paid over his share of loss, he is entitled to recover the excess paid from his co insurers. Thus, the principle of contribution applies in the case of fire insurance.