Fire Insurance: Why is it important - Research Paper Example

Fire Insurance: Why is it important? Executive summary This research paper highlights the importance and effectiveness of fire insurance policy for an individual. It also highlights the risks that are covered within the policy and those, excluded from the policy. Moreover, this research paper also focuses on the guidelines and conditions that need to be obeyed by both insurance company and policy holder at the time of buying a policy. The paper will talk about the varied types of fire insurance policies that are present within the market and will try to find out the best alternatives. It will present a brief outline about the items that need to be included within the underwriting process of fire insurance policy. Table of Contents Executive summary 2 Table of Contents 3 Introduction 4 Aims and objectives 4 Research methodology 5 Literature review 5 Advantages of fire insurance 7 Limitations of fire policy 8 General conditions and provisions 8 Underwriting process 10 Conclusion 10 References 11 Introduction In order to maintain the safety and security level within the household, fire insurance is extremely essential. Disaster is entirely uncertain in nature. It may happen at any time and at any place. Fire insurance is a type of coverage, in which a company agrees to offer some amount of the money after estimating the total loss caused by the fire within a specific time span. Fire insurance offers protection of the residence, furniture and other household related belongings. The family members who survived a fire accident can claim the benefits to the insurance company for whom who have lost their lives on the same incident. So many people in recent times buy a fire insurance to remain protected from the fire disaster to some extent (Twomey & Jennings, 2007). Fire insurance policies also offer the lost amount of the utilised properties to the policy holder which reduces the burden imposed by the unfortunate incident. But the exact amount of fire insurance policy might be attained only if all the rules and regulations are obeyed in appropriate way. Otherwise, the insurance policy might create varied types of problems for the policy holder at the time of presenting the lost amount. The thesis statement of this research paper is to analyse the importance and effectiveness of fire insurance for an individual. Aims and objectives The aim and objective of this research paper is to analyse the usefulness of fire insurance for an individual. This research paper also focuses on the underlining benefits and advantages of fire insurance in this age as compared to other insurance coverage’s. Moreover, the research paper also includes the benefits that the fire insurance does not cover as well as the general provisions and conditions. Research methodology This research objective is qualitative in nature and hence secondary research sources are used such as online sources, journals, company guidelines, books etc. The topic of this research is considered as qualitative as it tries to highlight the behaviours and attitudes of the individual affected by fire. It also tries to focus over their decisions after being affected due to fire. Thus, in order to analyse the decisions and views of the affected individuals, various journals, articles, online sources as well as news sites have been concluded in the discussion. Therefore, for these causes, secondary research methods will be most useful to identify the importance of fire insurance for an individual. Literature review According to Gurusamy (2009), fire insurance policy is a sort of policy in which an individual offers a specific amount of premium to an insurance company in order to attain certain benefits for loss of fire. In this type of policy, the indemnity is always free to change, based on the elements of the policy. Moreover, the individual might surely confirm from the insurer, the varied kind of risks covered in this policy, so that it may prove effective in case of fire disaster. Fire insurances also offer security of belongings like furniture’s, apparatus, electronic products and enterprise buildings. There are varied types of fire insurance policies as stated by Gurusamy (2009) like specific policy, comprehensive policy, valued policy, floating policy, replacement or reinvestment policy. Specific policy is one of the best types of fire insurance policies as the insurer had to pay a specific amount which shall be less than total value of the property. This is mainly because in this type of policy, the total amount of the property is not considered at the time of calculation of indemnity. So, the insurer had to bear a huge amount of loss at the time of presenting a stipulated amount of revenue to the suffered individual. However, the insurer had to bear such a loss mainly for the average clause section. According to this clause, the insurer also needs to bear some extent of the loss caused by the disaster of fire over the property of the individual. Therefore, this policy is also considered as an average type of fire policy as well. Other than specific or average type of fire policy, another highly prominent one is comprehensive policy. As per this policy, the policy holder is liable to attain the total amount of the assets wasted or damaged for fire, theft or burglary etc. But, in order to attain the amount, specific proofs need to be presented; otherwise the requisite amount may be cancelled. Valued policy is a policy departure from the standard contract of the policy. In this policy, a specific amount is presented to the policy holder, which is fixed for all sorts of damages like theft, fire, burglary etc. But the amount of properties damaged for fire is not taken into consideration and its preference is quite low within the minds of the policy holders. Floating policy is also a sort of fire policy in which, average clause is present as stated by Gaunlett (2010). As per this policy, the amount varies from one policy holder to another under a similar contract. This means, this policy offers protection of the damages caused to the products present in two different warehouses under the similar premium. So, this policy of fire insurance is highly preferred by most of the individuals as it may offer protection to two products placed in diverse locations. Hence, its name is described as floating policy. In addition to floating policy, in re-investment or replacement policy, the insurer had to bear varied types of re-instatement clauses. Therefore, the insurer has to offer varying amounts of money for the damaged products to the policy holder in different periods. Hence, the insurer always tries to re-instate the property so as to get rid from presenting huge amount of cash. Advantages of fire insurance As per Hardy (2009), fire insurance plays a very important role within the life of an individual. This is because a catastrophe might take place at any time for various factors such as arson, natural elements, unattended cooking processes, faulty writings and many others. Protection for damaged assets: The fire insurance policies offer protection to the policy holders for the damage caused by fire. This is the reason why people prefer to buy fire insurance and they believe that they can claim for reimbursement in times of need. Since many people are mainly risk averse, they aim not to get exposed to the risk of fire loss and tend to buy fire insurance for safety purpose. Alternative price for the electronic items: The alternative amounts of the electronic assets may be obtained by the policy holder, for the cause of fire. This is considered as one of the prime reason for which the demand of fire policy is increasing in this recent age. Offer prices for the damaged furniture: Insurer may offer a huge amount of money to the policy holder for the damaged furniture and this might prove extremely effective to renovate the entire room. Offers medical expenses: The insurer of fire policies also bears the medical expenses of the employees of any organization, injured by fire. This is also another important advantage for the business entrepreneurs and so they are interested to invest in it. Loss of used proper coverage: Fire insurance policies also offer the amount of loss of the used properties. This facility is extremely preferred by the policy holders as compared to others. Financial assistance: Having fire insurance will provide some kind of financial assistance to the policy holder affected by fire. The sum of money claimed by the policy holder can be used to rebuild the damages caused by fire (Deitch, 2008). Limitations of fire policy Fire policies also comprise of certain limitations. For example: it does not cover the medical bills of the pets, pet loss for fire, loss of garage, loss of gazebos etc. Moreover, this policy of fire also does not cover the damages caused by windstorms, floods, earthquakes hail etc. So, for these causes, many individuals do not prefer fire protection policies. General conditions and provisions The fire insurance policies mainly cover the damage caused to the materials or properties of an individual. It also presents the amount lost by the damage caused by lightings, smoke, steam etc but not exceeding the insured sum. Moreover, in case of fire insurance policies, the loss of the immovable properties such as gardens, garage, water tank, elevators, escalators, coal stores etc are covered by insurer unless they are included within the total sum assured of the policy. The damages of these immovable materials may be covered by the fire insurance company (Clarkson & et. al. 2005). In case of movable properties, only the insured or itemized properties are listed accordingly in case of damages. Once the listings are complete, then their prices are calculated and then offered as per the damaged value to the policy holder (Darrach, 2008). In addition, only the insured family members are offered damage loss and those not listed as family members are not offered any sort of advantages. Damages such as strike, terrorism, lockout, riot, earthquake volcano etc are entirely excluded from the list of insurance coverage. Any loss caused on behalf of war, invasion, civil war, rebellion etc is not under any sort of insurance coverage. So, if any sort of loss occurs for such type of damages, then the fire insurance policy providers cannot be held responsible. The fire insurance policy makers are only liable to offer the amount insured by the policy holder. If the amount of money insured is lower than value of loss then the insurer might pay only the amount insured with the organization and not the total loss amount. But in case the policy holder offers extra amount of money to the insurer then the insurer is always liable to adjust the extra sum in the form of several premiums. However, in order to attain the amount of loss covered by the policy holder, he or she needs to notify the insurer within five years of occurrence. Otherwise, he or she may not attain the lost amount from the insurer. The policy holder also needs to obey all the rules and regulations of the organization in order to attain its benefits effectively. The policy holder also needs to inform the insurer in case of any sort of changes in the stipulated amount and the insurer might offer the stipulated time period to the policy holder in written documents so as to avoid any sort of confusions. Furthermore, the insurer might offer all sorts of information to the policy holder at specific time period in order to avoid any type of confusions (Stempel & et. al. 2012). Prior claiming the requested amount, the insurer might look at the damaged properties. But it might be possible only after proper authorization from the policy holder, as in case any sort of any other damages or loss, the insurer may not be responsible. However, after attaining the authorisation, the insurer might complete the investigation so as to determine the amount of loss or indemnity. Thus, if all these above mentioned points and regulations are obeyed by the policy holder then the insurer is bound to offer the requested amount at any specific time period (Kalis & et. al. 1997). Therefore, as the fire insurance policies comprise of varied types of clauses, so it is highly demanding and preferable for the entrepreneur, businessman and individual owners. Underwriting process The underwriting process of fire insurance policy includes varied types of information such as loss history, time and date of the loss, relationship of trust with producer, financial condition, loss control report or the report offered by the engineer, quality management report, loss recommendations etc in a descriptive way so as to make the interested customers attracted towards the brand (Reed, 1940). However, all these above mentioned information and facts need to be followed at the time of underwriting procedure of fire insurance policies. Only then, it might prove effective in all respects. Conclusion Conclusively it might be stated that, fire insurance policy is extremely essential for the individual and businessman. This is because it helps an individual to attain the lost amount from the insurance policy in a very small time frame. Fire insurance policy also helps an individual to attain the lost amount of furniture, electronics items as well as individual, if listed within the insured amount. For these causes, the level of preference of fire insurance policies is extremely high among the future conscious individual. But, the fire insurance policy might be effective only if the policy holder obeys all the rules and regulations of the organization in an effective way. References Clarkson, K. & et. al. 2005. Wests Business Law. New Jersey: Prentice- Hall. Darrach, H. 2008. The Standard Fire Insurance Policy. London: Sage. Deitch, G. A. 2008. The Standard Fire Policy: Lectures Before the Fire Insurance Club of Chicago. USA: BiblioBazaar. Gaunlett, D. A. 2010. IP Attorneys Handbook for Insurance Coverage in Intellectual Property Disputes. London: Sage. Gurusamy, 2009. Financial Services, 2E. USA: Jones & Bartlett Learning. Hardy, E. R. 2009. Fire Insurance Law. New York: Springer. Kalis, P.J. & et. al. 1997. Policyholders Guide to the Law of Insurance Coverage. London: sage. Reed, P. B. 1940. Fire Insurance Underwriting. New Jersey: Prentice- Hall. Stempel, J. W. & et. al. 2012. Principles of Insurance Law. New York: Cengage Learning. Twomey, D. & Jennings, M. 2007. Business Law: Principles for Todays Commercial Environment. New York: Cengage Learning. Read More