Fire insurance

Meaning of fire insurance

Fire insurance is a kind of insurance policy that operates to protect the policyholder against the losses and damages resulting from fire outbreak. It is a form of property insurance. A great percentage of its policies come with some form of fire coverage. However, some landlords usually buy additional fire protection coverage in the event their homes are completely or partially lost or sustain damages as a result of fire. This additional or add-on coverage helps to provide the cost reconstruction,  the cost of replacement or repairs, or reconstruction of property even beyond the limit set by the property insurance policy. It is however worthy of note that fire insurance policies come with exclusion clauses to take care of acts of god such as hurricanes, volcanoes, nuclear risks and similar perils.

Similarly, the insurance policy provides indemnity to the policyholder either on a replacement of cost basis or through the provision of an actual cash value for damages sustained. And as earlier said, even though some Homeowners insurance policies include fire protection, they may not be comprehensive enough for some homeowners who may need a more comprehensive coverage.

Benefits of fire insurance

There are various benefits with buying fire insurance policy and some of them include;

1. The policy serves to protect the policyholder and his family against the losses arising from fire incidents.
2. provides policyholders with coverage against loss and/or damage to their homes and possessions. That is to say, the interior and exterior of the home and other significant assets in the insured property.
3. Fire insurance Policies may also provide coverage in the event of injuries in the insured property.
4. In mortgage transactions, some lenders usually insist that you have a fire insurance policy before they will be able to advance loans to you. In this sense, fire insurance policy provides security in the mortgage loans.
5. Fire insurance covers a holder against fire loss or damage from various causes such as fires as a result of electricity surge, gas explosions, lightning and other natural disasters.
6. It helps business owners to protect and grow their businesses by having a fall back in the event of business loss as a result of fire outbreak. When you buy fire insurance for your property, your business property will stay protected for the losses you have incurred.

others are;

1. Fire insurance can provide a new property for you in the event of total or complete loss of property.
2. Fire insurance policy equally affords the holder absolute peace of mind.
3. There is always a provision for coverage notwithstanding that the fire originates from inside or outside of the home.
4. Similarly, in the event of complete loss. The insurance company may reimburse you the actual market value of your insured property. This will usually include the market value indemnity for lost possessions. However, some fire insurance policies do place limitations on the amount of indemnity for luxury items such as paintings, jewellery, and fur coats gold etc.
5. It also provides third party liability protection. That is, damages sustained by other persons in the insured property.
6. It still provides coverage for your employees in the event they sustain injuries or loses in workplace fire incident.

Disadvantages 

1. Despite the insurance policy, the policyholder is required to take absolute care to avoid fire incidents. In other words, the holder must not be found to be negligent or responsible for the cause of the fire outbreak or else, there may be denial of benefits.
2. The premium payable for fire insurance policy may be too expensive.

Types of fire insurance

There are various types of policy. These types are associated to the level of coverage it affords t the policy holder. Some of them are;

1. Comprehensive insurance policy
2. Valued policy
3. Blanket policy
4. Consequential policy
5. Third party policy

Comprehensive insurance policy

As the name implies, the coverage here is wide with little or no limitations. However, this is the most expensive of all other types of fire insurance. This type covers incidents such as accidents, arson, lootings, wars, civil unrests, etc in a single policy.

Cash value policy

This is the type of policy in which the terms of the policy stipulates the amount payable by the insurance company in the event of loss. In this case, it is immaterial whether the property is partially or wholly damaged. In the event of lass, the insurance company will pay the full amount of compensation as contained in the face of the policy.

Consequential policy

This is the type of coverage that operates to provide indemnity to losses incurred in consequence of a fire incident such as the cost of renting an alternative accommodation and salaries to employees even when they are not working.

Blanket coverage

Here, a singular insurance policy is used to insure different properties in different locations against the risk of damage due to fire.

Third party policy

Most often when we experience fire outbreaks in our properties, the properties as well as the belongings of third parties are affected. This third party policy serves to afford protection to other persons who sustain injuries and looses in the incident of fire outbreak of an insured property.  

Conclusion

Fire insurance policy is very important for the protection of our properties against the risks of fire.

It is advised that a holder of a policy should adopt the practice of valuing an insured property on a yearly basis to find out if there is need to increase the amount of cover in the policy. This is not withstanding that an increase in the amount of coverage will lead to an increase in the amount of premium payable in the policy.

Note also that the amount of coverage cannot exceed the actual value of your property. However, there may be a provision for extra coverage to offset any extra cost for the repairs or replacement that exceeds the limit of insurance as set by the policy.

Finally, the policy may include add-on coverage against water damage or smoke or both as a result of fire which is normally effectual for one year and maybe subject of renewal.