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Unit 10: Fire Insurance
Reinsurance is an entirely new contract distinct from the original insurance contract entered Notes
into by the ceding company and the re-insurer. The original insured is not a party to the
reinsurance contract and hence, has no rights against the reinsurer.
A company which accepts business from public may also accept reinsurance business from
other insurance companies if allowed by the statutes of the country.
10.7 Keywords
Average Policy: A fire policy containing ‘Average clause’ is called an average policy. Under this
policy, if the actual value is greater than the insured amount, the insurance company will pay
proportionately and the insured is deemed to be his own insurer, for the balance.
Floating Policy: This policy is taken out to over goods belonging to the same person but lying
in different lots at different places under one sum for one premium.
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.
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.
Specific Policy: Under this policy a definite amount is insured on a specified property and in the
event of loss, it will be paid if the loss falls within the specified amount.
Standard Fire Policy: This policy is issued for compensation of all direct loss or damage caused
by lighting and burning.
Unvalued Policy: An unvalued policy in one in which the value of the subject matter is not
declared at the time of policy taken.
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.
10.8 Review Questions
1. Define fire insurance. Also, explain the meaning of fire insurance.
2. Describe the persons which have insurable interest under fire insurance.
3. Mention the types of losses both covered and not covered under fire insurance.
4. Briefly explain the elements of fire insurance contract.
5. Name the various kinds of insurance policies under fire insurance.
6. Differentiate between valued and unvalued policy.
7. Write short notes on floating policy and stock declaration policy.
8. Explain the procedure that should be followed in case of claim settlement under fire
insurance.
9. Briefly explain the concept of re-insurance.
10. Discuss the features of re-insurance business.
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