Fire Insurance

Business Studies

definition

Main elements of Fire insurance contract

Fire insurance is contract where the insurer undertakes to pay the insured in case of damage caused by fire. To claim fire insurance two conditions need to be met. There must be actual loss due to fire and the fire must must be accidental.

The main elements of a fire insurance contract are:

(i) In fire insurance, the insured must have insurable interest in the subject matter of the insurance. Without insurable interest the contract of insurance is void. In case of fire insurance, unlike life insurance insurable interest must be present both at the time of insurance and at the time of loss.

(ii) Similar to the life insurance contract, the contract of fire insurance is a contract of utmost good faith i.e., uberrimae fidei.

(iii) The contract of fire insurance is a contract of strict indemnity. The insured can, in the event of loss, recover the actual amount of loss from the insurer. This is subject to the maximum amount for which the subject matter is insured.

(iv) The insurer is liable to compensate only when fire is the proximate cause of damage or loss.