Q. 7 Define Fire Insurance? Discuss the essentials of a valid fire insurance contract?
The term ‘FIRE’ should be understood in its ordinary sense. It means the production of light and heat by combustion. There must be ignition, though there may not be flames. There is no fire unless there is actual ignition. Loss by fire will not include any loss by heating alone. In the case of loss by fire, its cause or origin is immaterial. Further damage which occurred as a result of putting out the fire would also be covered by the fire, risks e.g., damage caused by the fire brigade by water thrown on goods to extinguish fire and so on. However the immediate and proximate cause in case or fire policy must be fire alone even though it had not originated within the insured premises.
Contract of fire insurance
It is a contract whereby, the insurer in consideration of premium paid, undertakes to pay for or make good loss. Suffered by the insured as a result of damage caused to the property by fire covered by the police.
Fire insurance is a contract between the policyholder and the insurance company in which the insurance company undertakes the indemnity caused by a fire to the particular property in the particular period. The premium is also fixed in contract. The insurance company will compensate the loss but not more than the insured amount.
ESSENTIALS OR PRINCIPLES
1. INSURABLE INTEREST
The insured must have insurable interest in the subject matter when the loss takes place, for example owner of the car has insurable interest and not a driver.
2. ABSOLUTE GOOD FAITH
All the facts about the subject matter should be disclosed by the insured to the insurer. The contract will be invalid in case of fraud.
3. CONTRACT OF INDEMNITY
It is a contract of indemnity. When the amount is claimed after the loss has occurred. Insurance company compensates the loss up to the insured amount limit. If there is no loss than no claim, is accepted.
4. PERSONAL RIGHT
A man whose name is mentioned in the contract he has a right to receive the insured amount from the company in case of loss.
5. PERSONAL CONTRACT
It is a personal contract between the insured and insurer. This contract cannot be transferred without the consent of insurance company.
6. DIRECT LOSS
It is also specified that loss by the fire should be direct and fire should be immediate cause of loss.
7. PARTICULAR PERIOD
The contract of fire insurance is for a specified period, usually for one year.
8. DESCRIPTION OF PROPERTY
It is also an essential part of the contract. The location of the property should be described IRY the contract.
9. PREMIUM CONSIDERATION
The policy must mention the sum of insurance and the rate of premium.