Page 186 - DCOM309_INSURANCE_LAWS_AND_PRACTICES

Unit 10: Fire Insurance

10. Existence: The contract of fire insurance comes into existence just as any other type of an Notes
insurance contract. The assured, by filling up the proposal and providing the information
of the asset insured submits the proposal of fire insurance contract to the insurer. The
insurer, after verifying the facts and figures mentioned by the assured and satisfying
himself accepts the premium and issues the cover note or the policy document to the
assured as a token of the conclusion of the contract.
11. Duration: The fire insurance policies are of short duration. The period of the contract
normally ranges up to one year. The policy has to be renewed after the expiry of the
period of the insurance. Once the policy lapses the cover also lapses. The renewals of the
policy, by paying the premium, make the contract valid for another term on the original
terms and conditions of the policy. The insurer issues a new policy document to the
assured on renewal.

Self Assessment

Fill in the blanks:
5. The parties to the contract should have the ………………………… to contract.

6. The fire insurance contract, being a typical insurance contract, is a contract of
…………………............
7. The fire insurance contracts insure the ……………………………. of the assured.

8. The insurer issues a new policy document to the assured on ………………………….
10.3 Kinds of Policies

Let’s study about the various kinds of policies. This is also shown in the figure given below:

Figure 10.1: Kinds of Fire Insurance Policies

Kinds of Fire Insurance Policies

Valued Unvalued or Long-term, All Risk Limited Risk
policies open policies mid-term and policies policies
short-term
policies

The principal types of fire insurance policies are given below:

1. Valued policy: It is a policy under which the insurer undertakes to pay the insured the
amount of the value of the property declared in the policy. Under this policy, the value of
the subject-matter is previously agreed between the insured and the insurer and this value
forms the basis of indemnity. The actual market value is not taken into account. Thus, the
amount payable under a valued policy may be more or less than the actual value of the
property.
Valued policies are not generally issued in fire insurance. They are usually issued on
pictures, works of art, sculptures and such other things whose value cannot be easily
determined.

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