Fire insurance is a contract from year to year only and insurance automatically comes to an end after the expiry of year. If before the expiry of the year, the insured expresses his intention to continue and pays the premium then it can be continued for a further period.
The premium can be paid either in a lump sum or by installment. The document containing the terms and conditions is known as a fire insurance policy.
Principles of fire insurance
- Utmost good faith: In fire insurance policy when the insurance is given by the company to insured then it is given with the motive to protect from various losses. So it is expected from the insured to give material and vital information. This principle also binds the insurance company that both parties have to be of utmost good faith and have a sincere desire that fire should not take place and if it takes place both will be unhappy.
- Insurable interest: Every fire insurance contract must have insurable interest which means there must be a financial involvement in the event insured. The insured must be interested in the preservation of the subject – matter.
- Indemnity: This principle is essential in the fire insurance contract. All fire insurance are contracts of indemnity. In case of loss, the insurer will pay the actual amount of loss by making monetary payments or by repairing the damaged property. The object is to bring the insured to a level where he remains in the same position.
- Subrogation: If the damage is done to your property, and it is protected by a riot insurance policy, the insurance company may collect, from the party who set to fire to the property. Subrogation is the right of the insurance company to recover from a third party. Thus, if the insured posses any rights against a third party for recovery of loss, the insurance company becomes subrogated to these rights.
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