Fire Insurance Basic Principles & Add On Covers

Fire insurance business has been defined in Section 2 of the Insurance Act, 1938.The subject matter of fire insurance may be any kind of moveable and immovable property having pecuniary value. Fire insurance contracts are governed by the general law of contract as embodied in the Indian Contract Act, 1872. Fire insurance business was governed by the All India Fire Tariff. The Tariff Advisory Committee have laid down rules, regulations, rates , advantages, terms and conditions for fire insurance business in India under the provisions of Part IIB of Insurance Act ,1938.

Fire insurance is governed by basic principles evolved under common law. These include: Utmost good faith, Principle of Indemnity, Insurable Interest, Proximate Cause, Contribution and Subrogation.

The sum insured is to be fixed by the insured. The sum insured should represent the actual value of the property insured. If there is over-insurance ,there is no benefit to the insured ; if there is under-insurance ,the claim amount will be proportionately reduced by applying pro-rata average.

The fire policy form consists of three main parts: Operative clause, General exclusions and gereral conditions. Perils covered generally include: fire, lightning, aircraft damage, explosions, implosions ,aircraft damage, riots strike, terrorism damage, storm, cyclones, hurricanes , tornados, bush fire, leakage, bush fire , etc.  There are generally thirteen exclusions prescribed in a fire policy. There are generally fifteen conditions prescribed in a fire policy.

Add on covers are extensions of the fire policy on payment of additional premium and granted by attachment of endorsements.

  • Earthquake (fire and / or shock) is the additional cover which is available for Earthquake fire only on Earthquake (Fire and Shock both).
  • The forest fire extension includes loss of or damage to the property insured directly caused by burning of forest, jungles and clearing of lands by fire.
  • Impact damage due to Insured’s own vehicles and the articles dropped from them is the extension that covers loss by direct impact to insured’s property caused by insured’s own power driven vehicles , forklifts, cranes, etc.
  • Deterioration of Stocks in Cold storage premises due to accidental power failure consequent to damage at the premises of power station due to an insured peril is the extension that covers damage to the property insured caused by change of temperature.