Great Advice For Fire Insurance

Introduction

Why We Need It?

If you are not insured with a fire insurance policy on your business or house there is always a risk to ruin everything both emotionally and financially if a fire occurs. Every home owners or business men should have a fire insurance of certain amount to cover loss from a fire. For all businesses it is essential to have suitable fire insurance policy, it is an admissible expense under all Income Tax Acts.

Step 1

How it Works

Fire insurances are one form of property insurance that protects the insured against all losses due to a fire. There are many standard blanket insurance policies that include fire insurance policy along with other insurance options under a same insurance plan. Fire insurance policy can be purchased separately also. Under a fire insurance policy the insurance company or the insurer, as it is called, normally pays you the actual amount of loss caused to you by fire, it does not allow you to make any profit from the fire. The salvage value or the value of the items saved from fire is deducted from the insured value and the insured value net of salvage value is paid to the insured. However, there are many instances, where people do not buy fire insurance plan for the full value of their property but purchase policy for less amount, they do so for many reasons, such as, they want to save excess money to be paid as premium on the full value of the assets under the plan or they do not show or avoid showing the true value of their business or possession officially. Thus, they insure for less amount of their property which is the subject matter of the insurance. They declare a less value and pay premium accordingly. This situation is known as “under insurance” in insurance terminology. Suppose the value of a property worth $100,000 but the insured declares it as $70,000, so he purchased insurance for a 30% less value, if any fire occurs to his property and he loses everything, if the “Under Insurance” is discovered by the insurance company, he will receive compensation from fire insurance company to the tune of 70% of the policy value only, that is $49,000.

On the other hand, if the insured buys fire insurance policy for the same property for $120,000 and pays premium for $120,000 and loses everything worth $100,000, he cannot claim $120,000 as loss caused by fire and make a profit of $20,000. Fire insurance is a contract of indemnification; they do not allow you to make profit. So it is always wise to purchase fire insurance policies at the correct value of your property.

There are many advantages of fire insurance policies:
The insurer may arrange for temporary accommodation, if the terms of your plan so dictates
Similarly, they may replace some valuable items of business or house contents at the replacement value.
They may assist you to rebuild the damage.

Fire insurance cover almost every items of your household or business, if properly disclosed at the time of purchasing the plan, provided, there is no limitation or restriction on such inclusion under the plan.

Tips

It is the duty of the insured to keep his property totally safe from fire with necessary fire preventive measures and the bottom line is-- the fire must not be a result of any intentional or willful act.

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