The risk of fire burning down property is a risk most do not like to entertain. It is, however, authentic. In this post, we’ll be breaking down fire Insurance, what it means, the types of fire insurance and how it works.
Meaning – what is fire Insurance?
Fire Insurance is a type of insurance that offers protection against the event of fire burning down property. Fire insurance covers any damages and losses that occur in the event of a fire. Fire Insurance is usually purchased as an additional insurance policy to property insurance. The coverage on Property insurance might be limited, but with the addition of Fire Insurance, you are compensated for expenses on replacements, repairs and reconstructions.
What are the types of Fire Insurance?
Fire Insurance policies are usually determined by several factors, such as the type of risk involved, the property being insured, what’s inside the property, any risks increased by who lives in the property and any exposure factors. It also considers time as a factor. There are various types of fire insurance. The major types are;
- Specific Policy: this type of policy compensates the insured if the amount of loss is less than the specified amount. Take, for example, an insurance policy worth N100,000 is taken on a property worth N120,000. If there is a loss on property worth N90,000, the insured is compensated for the total loss. If the damage is up to the N100,000 insured, the compensation is paid in full. However, if it exceeds the N100,000 insured, compensation will only be paid up to that N100,000 insured.
- Valued Policy: this type of policy only compensates the insured up to a predetermined amount. That is, the insurance company and the insured agree on an amount, and in the event of damage or loss, that exact amount is paid.
- Average Policy: the average policy operates on the basis that discourages taking out policies lesser than the value of the property. In this case, in the event of damage or loss caused by fire, the insurance company only pays an average fraction of the premium and actual value of the property.
- Floating Policy: a floating policy is an umbrella policy that spreads the insurance over many goods/property in numerous locations. Instead of taking out different and specific policies on each site, a floating policy covers them all under one policy.
- Comprehensive Policy: a comprehensive Policy offers protection against all types of risk including fire, explosion, lightning, burglary, riots and labour disturbances. A comprehensive Policy is also called the all-risk policy.
- Consequential Loss Policy: sometimes, the damages or loss caused by a fire are not direct losses. They could be losses that arise because a fire has disrupted regular activities. Consequential Loss compensates the insured in the event of such damage.
- Replacement Policy: the replacement policy provides compensation based on the market value of the property damaged or lost. The replacement policy aims to replace lost or damaged items.
How does Fire Insurance work?
Fire insurance offers protection against losses caused by fire. A fire could be started by multiple sources, such as an electricity surge, gas explosion, or natural occurrence.
What are the requirements for making a fire insurance claim?
Claiming fire insurance is as straightforward as making any other claim. So long as the fire has been proven to have been no fault of the insured, compensation is usually guaranteed.
Fire insurance policies provide comprehensive protection against losses and damages caused by fire. No one hopes to have a fire outbreak, but it’s always better to be prepared than to be found wanting. Fire insurance is as essential as any other type of coverage, and you should consider taking out a policy.