Essentials of Fire Insurance Contract
The essential features or principles of fire insurance policy are as follows:
1. Contract of Indemnity:
The fire insurance is a contract of indemnity. The insurance company promises to compensate the loss suffered by the insured due to fire.
2. Insurable Interest:
According to this principle only of that person can insure the property that has insurable interest in it. It means a real owner can insured the property that has a right to get claims in case of loss.
3. Disclosure of Facts:
The owner of the property must disclose to insurance company in good faith
all the material fact of the property insured by him. If he conceals any fact, the
contract will become violable at the option of insurance company.
4. Single Premium:
As the fire insurance policy usually covers a period of one year and not more so only single premium payment is made to the insurance company. But the can be renewed with the payment of new premium.
5. No Profit:
The insured can never get claims more than the actual loss suffered by him So he cannot earn profit by purchasing, the policy more than the actual value of the property or to insure it for the full amount with more than one company.
6.Assignment of Policy:
The fire insurance policy can be assigned only with the prior permission of the insurance company. Otherwise, the assignee cannot get the claim in case of loss from the insurance company.
7.Time Period covered:
The fire insurance policy normally covers the period of one year with an option of renewal. At the expiry of one period, the policy can be renewed with new term and conditions.
8. Payment of Claim:
The claim against loss of property due to fire can be paid only to the person whose name is registered with insurance company as insured policyholder.
9. Description of Loss:
The nature of loss covered by the fire insurance policy must be clearly described in the contract of insurance, so that there should not be any ambiguity later on
10. Notice of loss:
In case of loss to the property, it is the duty of policyholder to serve in writing immediate notice to insurance company. The company will then investigate the reason of fire and will determine its liability for the payment of loss.
11. Written Contract:
The contract of insurance must be written on proscribed form and it must
fulfill all the general terms and conditions of a valid contract.
12. Subrogation:
When the total loss has been paid to Dfa Ho policyholder, the insurance company has a right to occupy the destroyed property. It an also take action against third party if the fire occurred due to the negligence of third party.
