Page 188 - DCOM309_INSURANCE_LAWS_AND_PRACTICES

Unit 10: Fire Insurance

This policy is issued with a provisional premium which is calculated on 75% of the sum Notes
insured.

Notes The insured must declare in writing the stocks covered under the policy during
each month within 14 days of each calendar month (or any other date specified in the
policy).
At the end of the year, the average amount of stock at risk is calculated on the basis of the
total declarations and this average amount forms the amount insured. A minimum amount,
however, is charged by the insurer under this policy.
This policy is taken for covering the stock where great fluctuations in the value can
happen throughout the contract period. On such policy 75% of the premium has to be
deposited in advance. The maximum liability of insurance company is specified in the
policy by the insured. At the end of year the average stock and final premium is calculated.
7. Loss of profit policy: Such type of policy covers the loss of profit which sustains as a result
of fire. This policy is also known as consequential loss policy.
8. Standard fire policy: This policy is issued for compensation of all direct loss or damage
caused by lighting and burning. Such policy also covers damages by earthquake, hair
flood, explosion, cyclone and riot.

9. Reinstatement policy: Under this policy the insurer undertakes to pay the full price of the
property required to be replaced. Here it is possible to recover not the depreciated value
of buildings or machinery, but the cost of replacement of the damaged property by new
property but of the same kind. This policy is issued in respect of buildings, or plant and
machinery.
This type of policy was introduced after the First World War when there was very heavy
inflation the world over. It is also called as “Replacement Policy”. This type of policy is
not very common in these days.
10. Schedule Policy: A schedule policy is one which insures many properties under collective
terms and conditions, Details of the properties and their respective rates of premium are
listed in one policy only for the convenience of the insured.
11. Comprehensive Policy: A fire policy usually does not cover loss occurring as a result of
riots, civil strife, rebellion, etc. But fire insurance companies do sometimes issue policies
of a comprehensive nature to house-owners. Such policies usually cover the risks such as
fire, explosion, thunderbolt, lightning, riots, strike etc. Such a policy is known as
comprehensive policy or “All Insurance policy.” Such policies are not common in our
country.
12. Sprinkler leakage policy: This type of policy covers the loss of building as a result of the
damage by the leakage of liquid or water.
13. Excess policy: This policy is issued for the stock of merchandise whose value is constantly
fluctuating. In such case it is not suitable to take one policy for certain sum. So the insured
takes an ordinary policy for minimum value of the stock and excess policy for excess value
of the stock. The actual value of the stock will be reported periodically
14. Maximum value with Discount policy: Under this policy one third discount of the premium
paid is refundable to the insured at the maturity of the policy. This policy covers the risk
for maximum amount.

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