Fire insurance policies are usually classified into 15 types based on the insurance hazards, insured risk, business type and policy rules. For meeting the various needs of the businesses and individuals, these are the various types of fire policies which are issued:
- Valued Policy.
- Valuable Policy.
- Specific Policy.
- Floating Policy.
- Average Policy.
- Excess Policy.
- Declaration Policy.
- Adjustable Policy.
- Maximum Value of Discount Policy.
- Reinstatement Policy.
- Comprehensive Policy.
- Consequential Loss Policy.
- Sprinkler Leakage Policies.
- Add on Covers Policy.
- Escalation Policy.
Let’s look at a few of them:
The valuable policy is that policy where the claim amount is to be determined at the market price of the damaged property.
The amount of loss is not determined at the time of commencement of risk but is determined at the time and place of loss. This policy is truly representing the doctrine of indemnity.
Where a specific sum is insured upon a specified property in case of a specified period, the whole of the actual loss is payable provided it does not exceed the insured amount.
Here the value of the property insured has no relevance in arriving at the measure of indemnity in a specified policy and the insured sum sets a limit up to which the loss can be made good.
This policy undertakes full protection not only against the risk of fire but combining within the risk against burglary, riot, civil commotion, theft, lightning etc. The policy is also termed as ‘All in policies’.
Here the term ‘Comprehensive’ does not mean that every type of risk is covered. There may be many exclusions and limitations.
This policy is beneficial to the insured and the insurer. The insurer can get higher premium, and the insured is protected against losses due to several specified perils.
Add-on Covers Policy
An insured may like to cover his property against some of the exclusions. For example, earthquake damage is added to the fire policy. The cover in respect of these perils is provided by the insurer by charging an additional premium.
There are certain principles to Add-on Covers. It is an extension of the basic standard fire policy. The liability shall in no case under the extension of the policy exceed the sum insured of the policy. All the conditions of the basic fire policy shall apply to the insurance granted by extension.
If the insured requests for the Add-on Cover to be cancelled midterm, no refund of premiums for the cancellation will be allowed unless the entire policy is cancelled.
This insurance allows an automatic regular increase in the sum insured throughout the policy in return for an additional premium to be paid in advance.
There are certain conditions for escalation insurance. The escalation of policy amount shall not be more than 25% of the sum insured. The clause cannot be opted for during the currency of the policy but only at inception or renewal. It also allows an automatic regular increase up to 25% of the sum insured of throughout the policy in return for an additional premium to be paid in advance.
Special policies for different risk exposed products are also issued specifically with their respective premium term and warranties.
The important specialised policies are
- petrochemical policy,
- industrial risks policy,
- machinery breakdown policy,
- material damage policy,
- business interruption policy,
- engineering good policy,
- electrical installation policy,
- housekeeping policy,
- mega risk policy and
- consequential loss policy.