Fundamentals of Fire Insurance Policy

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Any loss or destruction incurred as a result of a fire mishap is compensated by a fire insurance policy. There are certain fundamental principles that come when you buy fire insurance. The main ones that come under a general contract include the following.

The Observance of Good Faith

This principle states that the insurer and insured need to reveal all the facts that are related to the subject matter. These include all kinds of material facts. In regular cases, the insured person’s statements in the proposal form are adequate to determine the risk correctly but in cases that are more complicated, the insurer surveyor makes an estimation of the property. Through the entire insurance term, utmost good faith is required. Failing to meet this requirement results in the breach of good faith.


For a fire insurance policy, the doctrine of subrogation refers to the right of an individual to stand in place of another. This implies that after paying the compensation, the insurer has a right to take away the damaged property, which consists of a certain value, from the insured. The insurer is allowed to claim every right of the insured against any third party who is proven to be at fault for that loss. For instance, in cases of default or third-party negligence.

Insurable Interest

This is a general principle when you buy fire insurance The insurable interest needs to be available at the time of putting the insurance policy into effect as well as at the time of loss. The interest can be legal or equitable. It can also arise under a sale or contract of purchase. When it comes to goods, insurable interest arises due to contracts, ownership, and possessions.

A Contract of Indemnity

The objective is to keep the insured as far as possible in the same financial position and compensate accordingly after a loss is sustained. The compensation amount should be such that it places the insured in and around the same financial position that he was in, before the fire mishap. As per the policy, the insured is not allowed to make a profit out of the loss incurred so anything in excess will not be paid to the insured.

Procedure for Taking a Fire Insurance Policy

Any individual wanting to buy fire insurance needs to carry out this procedure:

Filling up a Proposal Form: A proposal form has to be filled out which is provided to you by any general insurance company. You need to mention your personal details and get it duly signed.

Evidence of Respectability: The insurer needs to know for a fact that the proposer is respectable and shows the potential of staying true to the policy. After evaluating the proposal, the possible loss involved is calculated.

If all goes well, a letter of acceptance is sent to the proposer. The amount of premium that needs to be paid is mentioned. Following this, a cover note is issued which stands valid until the fire insurance policy comes into effect.

All-in-all, fire insurance basically works to relieve the insured from the horrors and loss that exists after a devastating fire, but knowing what to do and expect is important. 

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