Blue Fire Insurance
Concept of Fire Insurance
Fire insurance is a financial protection against fire hazards. Fire insurance is a contract between an insurer and a policyholder that promises a maximum amount of compensation for damage caused by a fire hazard on a specific property and for a specified period of time. The subject of fire insurance is both immovable and movable property and its associated damages.
Who is the father of fire insurance?
Nicholas Bourbon has been called the father of modern fire insurance. In 180, he started paying compensation against fire risk and formed an insurance company called Agni Office. The following are some important definitions of fire insurance:
Definition of Fire Insurance
1. M. N. Mishra said,
Fire insurance is the system of compensation for the damage caused by fire.
2. According to Ghosh and Agarwala,
Fire insurance is an agreement by which one party pays a fixed amount of compensation to the other party for the loss or destruction of its property due to the damage caused by fire within a specified period of time in exchange for premium.
From the above definition and discussion, the following features of fire insurance can be noticed:
1. Fire insurance is an agreement executed between two parties.
2. The purpose is to protect the insured financially from the risk of fire.
3. In case of fire damage, the insurer guarantees compensation.
4. In this case the insured property and the term of the contract must be specified.
5. This is a compensation agreement. So in this case as much damage has been done to try to make up.
Significance of Fire Insurance
Fire is a good servant but a bad master. Just as the use of fire has played a role in the development of civilization, so too has the use of fire in the development of human beings. Fire insurance is one of the essential measures of modern human life to protect against such fire damage. The following is a summary of its importance from different perspectives:
1. Creating the financial security system: Fire insurance does not protect property from fire damage but provides financial compensation. Insurance provides financial assistance to the victim to recover or rebuild property. This protects the individual's assets and the individual may be more focused on acquiring assets.
2. Helps in industrialization: Excessive use of energy resources and in some cases flammable materials in industrial areas increases the risk of fire. In addition, machinery and processes in the industry are often arranged in such a way that if a fire breaks out, it spreads quickly. As a result, fire hazards often discourage industrialization. By removing such barriers, fire insurance encourages traders or industrialists to invest in the industry with ease. Which is conducive to industrial development.
3. Establishment of security and relief: People naturally get excited when they hear or think about the flames of fire. As a result of the fire, the family sat on the road and the businessman became destitute. Therefore, by protecting all the necessary human resources from the risk of fire damage, Fire insurance is able to establish a sense of security and comfort in the society.
4. Creation of Awareness: Fire insurance helps its customers with the dangers of fire and provides them with the necessary advice on what to do. If anyone wants to get fire insurance, the insurance company tries to make sure that there is a fire extinguisher. Occasionally insures the insured and warns the insured about fire prevention. This creates awareness which plays an effective role in protecting national resources from fire damage.
5. Helps in distribution of risk: Fire insurance, like other insurance businesses, plays an important role in reducing personal and social risks by distributing insurance losses among thousands of policyholders. Fire insurance ensures economic and social well-being by sharing the risks associated with such hazards among individuals and organizations facing fire hazards.
6. Helps in creating employment: Many people are directly and indirectly involved in the fire insurance business. Besides, business was developed with the financial support of such insurance companies. The result is employment. Which plays an important role in solving the unemployment problem of the country.
7. Minimization of loss by fire: Fire insurance is not a measure to prevent or prevent fire risk. Fire insurance is a system to cover the financial loss caused by a fire. Nevertheless, fire insurance contributes to the reduction of fire risk and damage. The fire insurance authority provides fire prevention advice and also provides technical assistance on fire prevention to reduce the incidence of fires. Moreover, in case of fire, the insurance company uses its own fire brigade and equipment to put out the fire. This also reduces the amount of fire damage.
8. Capital formation & investment: The money that the fire insurance authority collects as premium is never lazy. The money received as premium constitutes a compensation fund or reserve fund and is invested elsewhere. Such funds constitute for the settlement of claims by premium money and its interest. This increases the amount of capital formation and overall investment in the country.
9. Promotion of trade & commerce: Fire insurance increases the incentive of investors to increase investment in business by reducing fire risk. Moreover, by distributing the money collected as insurance premium to the traders as loan, it also speeds up the development and expansion of business.
10. Increase in per capita & national income: Increase trade and commerce in the welfare of fire insurance, create employment opportunities. This increases per capita and national income.
11. Increase in government revenue: Increase investment in fire insurance and expand trade. The government collects taxes from the profits of these businesses. Moreover, the fire insurance company also pays tax to the government from its earned profit. As a result, the revenue of the government increases.
12. Improvement in living condition: Unemployment is reduced as a result of fire insurance. This reduces social crime and disorder. Moreover, as a result of agli insurance, per capita and national income increases. As a result, the quality of life improves.
Scope of Fire Insurance
Fire insurance is the only way to compensate for the damage caused by fire. Fire insurance is a contract of compensation. It carries the risk of property damage and incidental damage. Therefore, fire insurance coverage can be divided into two main headings. They are discussed below:
1. Goods Damage Insurance: Goods damage insurance covers general fire policy, special fire insurance, declared policy, restoration policy, covered policy, valuation policy and household fire insurance policy etc.
2. Ancillary Damage Insurance: Ancillary loss insurance covers:
i. Loss of net profit due to closure of factories as a result of various accidents and loss of maintenance of temporary operations by renting factories elsewhere to reduce losses.
ii. Losses after factory closure such as rent, electricity / water / gas bills, loan interest etc.
Types of Fire Insurance
As the potential for fire hazards has increased along with the widespread use of energy resources, the value of fire insurance has increased among all classes of people, including industrialists and businessmen. Therefore, in order to meet the needs of the policyholders and to cater to their interests, the insurance traders have also introduced different types of fire insurance or fire insurance. The following is a list of different types of fire insurance:
1. Valued policy: An insurance policy in which the value of the insured property is specified in the policy with the prior consent of both the parties is called a valued policy. A special feature of such insurance policy is that in case of loss due to any accident mentioned in the insurance policy, there is no need to re-evaluate the loss or present new certificate for the same. In this case, the partial loss is determined by judging the insured value by determining how much part of the property has been damaged. However, if it is not possible to make such a calculation, then the loss is considered as overall loss.
2. Unvalued policy: An uninsured insurance policy or a fire insurance policy that does not assess the previously insured property and has arrangements for later valuation is called unvalued insurance policy. In such an insurance policy, the content of fire insurance may be specified in advance and once again, such insurance policy can be opened by targeting all the assets of an insured which are fire insurable. In the second case the content of the insurance and its value is determined later. This is why it is also called open fire insurance.
3. Specific policy: A fire insurance policy that refers to a certain amount of value against a certain amount of property and in case of loss the insurance company is obliged to pay the amount mentioned in the insurance policy is called specific insurance policy. Suppose a property worth Rs 10,000 is insured for Rs 8,000. Now if there is a loss of 5 thousand rupees, the insured can still get 6 thousand rupees. If there is a loss of 6 thousand rupees, the insured will get 6 thousand rupees. In other words, whatever the loss, it will be considered as total loss and the policy of replacement will be effective. So in this case usually the insured price does not show any less.
4. Average policy: Such insurance policy is the opposite of specific insurance policy. In case of loss in the case of insurance policy, the average amount is determined without paying the amount mentioned in the policy. It is called average insurance policy. The origin of such an insurance policy is to prevent the insured from taking more money from the insurance company by showing higher value of the property. In this case, the ratio of the actual value of the insured and the sum insured is multiplied by the amount of actual loss and the amount of loss is determined at an average rate and it is considered as an insurance claim. As the actual market value of the property at the time of the accident is taken into account, there is no possibility of loss to the insured and the insurer. If the market value of the property is high then the insured is considered to have paid less premium. As a result, part of the loss is borne by the insured.
5. Floating or blanket policy: If the property of the same organization is kept or stocked in different places and all the scattered properties are insured under the same insurance policy, then it is called floating or camp insurance policy. In many cases, large traders or producers have facilities and resources in different places. Even in the case of commodities, some goods are stored in industrial warehouses, some in regional warehouses, some in port warehouses and thus the arrival and departure continues. In such a case floating insurance policy is opened without opening separate insurance policy for the property or product kept in different places and the amount of premium is determined from its average by determining different premium for the property or product kept in each place.
6. Excess policy: In the case of fire insurance of goods stored in warehouses where goods are not stored for a fixed period of time but arrivals and departures always occur, additional insurance policy is issued along with the original policy. In this case the insured collects a simple fire insurance for the minimum amount of stock he always has and another insurance policy for the excess stock. The actual value of the surplus stock has to be declared every month and then a premium is levied on it by averaging all the declarations. In this case, the premium rate is lower on the insurance policy taken first and the premium rate is higher on the insurance policy taken for additional products.
7. Declaration policy: In which the policyholder specifies the value of the product with the maximum amount of product that he may have in stock at a given time and collects the insurance policy by paying a premium of 75% cash on that amount and declares the actual quantity of product at regular intervals. By adjusting the insurance premium at the end of the year, it is called declared insurance policy. Specific time usually means the end of the month. The amount of premium is determined on the basis of the average of the number of such declarations in the term mentioned in the policy. In order to overcome the problem of collecting two separate insurance policies in the case of additional insurance policies, the declared insurance policy has emerged.
8. Adjustable policy: An insurance policy in which the premium is assessed by writing as actual inventory at the time of taking the policy and then adjusting the premium and finalizing the premium calculation at the end of the term by informing the insurer through inventory reduction-increase declaration is called adjustable policy. Such an insurance policy is used to protect the insured from the fact that the dishonest insured may take unfair advantage of low premium in the declared insurance policy or he may get a higher amount of compensation by showing higher sum insured.
9. Maximum value discount policy: The insurance policy that specifies the maximum amount and value of the stock for the whole year and pays the premium on the basis of it. One-third of the insurer refunds the policy to the insured. In order to avoid the hassle of having to submit declaration in case of increase or decrease in quantity of stock in the case of declared insurance policy and adjustable policy, the discounted maximum price insurance policy has emerged.
10. Replacement policy: In case of loss of insured content in case of loss, the insurer agrees to restore the property without financially compensating the insured is called reinsurance policy. Such insurance policies were introduced after the Second World War. Noticing the gap between the sum insured and the cost of restoring it, insurance companies have introduced such restoration insurance policies. In the case of such insurance policy, the insured gets new property instead of the old one, so it is called New lamp for the old policy instead of the old lamp. Such insurance policies are usually issued against equipment and buildings.
11. Blanket policy: If the insured insures its various types of assets through a single policy, it is called a covered policy. If a trader insures his warehouse and warehouse assets under a single fire insurance policy, it will be called a covered insurance policy.
12. Consequential loss policy: This type of insurance is created to compensate for the material damage caused by the fire. However, the loss of movable and immovable property due to fire may temporarily and permanently hamper the operation and profitability of the firm. Ancillary insurance is issued to compensate the firm for long-term losses after a fire. That is, a fire insurance policy that promises to compensate the recipient for the loss or loss of the firm's long-term profitability as a result of the fire is called incidental insurance.
13. Comprehensive policy: Comprehensive policy that the insurer guarantees to the recipient in case of loss of insured material due to theft, robbery, riot, civil war, political unrest, etc. in addition to fire, is called comprehensive insurance policy. Although the overall insurance policy guarantees compensation against almost all types of risks, there are exceptions and limitations.
Methods of Taking Fire Insurance Policy
Aggregate insurance is a formal contract and some procedures have to be followed to accept it. Insurance policies can be obtained directly from an fire insurance company or through a company representative. The following are the procedures for obtaining an insurance policy:
1. Collection and Filling up of Offer Form: The policyholder who wishes to accept the form of insurance has to collect the application form from the insurer and submit it to the insurer. The following points need to be mentioned in the application form:
i. Name, address and occupation of the insured.
ii. Amount, description and location of proposed property.
iii. The nature and value of the property.
iv. Property quality, duration of production and materials used in construction.
v. Insurance period.
vi. Power used in factories or buildings.
vii. Description of any combustible material used.
viii. If the property or product is insured elsewhere, its details etc.
2. Collection of character certificate: As fire insurance involves moral risk, the insured has to collect character certificate from a responsible person. It is important to gather credentials because insurance companies want to do business with honest people to avoid risk.
3. Submission of offer form and other documents: The applicant has to fill up the application form properly and submit all the required documents to the policyholder. Deed of ownership of property or deed of purchased property is required to be submitted to the insured.
4. Supervision of subject matter and acceptance of offer: After receiving the offer along with the required documents, the insurance company initially accepts the offer and initiates an inquiry into the proposed property. After receiving the investigation report, the insurer accepts the offer if he is satisfied.
5. Payment of premium and collection of insurance policy: If the insurer accepts the offer, the insured has to pay the specified premium within the stipulated time. After receiving the premium, the insurer prepares the insurance policy by recording all the terms of the contract and pays it to the insured. The insurance contract is effective from the date of acceptance of the offer. Finally, fire insurance is a compensation agreement. Therefore, the above rules are followed for taking this insurance policy.
Doctrine of Indemnity in Fire Insurance
Under the policy of indemnity insurance, the insurer cannot compensate the insured more than the loss incurred. It would be illegal to pay compensation in excess of the loss or insurance claim. The purpose of following the policy of fire insurance compensation is 3. E.g:
1. Ensuring that the insured does not benefit from a fire incident under any circumstances. The insured may deliberately set fire if he can benefit from the risk. This increases the moral risk.
2. If the insured can benefit from a fire, there is always a tendency for the fire to burn within him. This increases anti-social activities. The purpose of this policy is to reduce such anti-social activities.
3. If the policy of compensation is not followed, the amount of insured claim will be higher and the amount of premium will also increase. In other words, the purpose of this policy is to reduce the amount of premium.
The following applies to the policy of fire insurance compensation:
i. The insured must present evidence of financial loss caused by the fire.
ii. In no case shall the amount of compensation exceed the amount of the insurance claim or loss.
iii. If the compensation is more than the amount of loss, the insured will be obliged to repay it.
iv. If the insured receives any money from a third party after paying full compensation, he will be obliged to return it to the insurer.
Doctrine of Subrogation in Fire Insurance
Substitution of fire insurance refers to the transfer of rights and interests of the insured to the insured in the subject matter insured. If the insurer pays full compensation for the insured's property, the insurer will be entitled to receive the wreckage of the insured material. That is, the insurer will get the legal right to the insured content after full compensation. The following applies to the replacement of fire insurance:
1. Substitution of fire insurance Substitution of interests and rights in the insured content. That is, the transfer of property rights from the insured to the insured.
2. The fire insurance replacement policy complements the policy of corollary. This is because even if the wreckage is insured after full compensation, it is more than the value of the property or the amount of the claim. That is the benefit of the insured.
3. Substitution will apply to just as much of the property as the insurer will compensate. If the insured receives compensation for the damaged property from the two insurance companies, then each insurance company is entitled to the same amount of compensation. If an insurer pays half the compensation, he is entitled to half the value of the wreckage.
