fire insurance
  • Preface
  • Meaning and definitions
  • Scope of Fire Insurance
  • Potential Risks or. Hazards
  • Types of Fire Insurance Letters
  • Issuance of fire insurance letter
  • Conditions of standard fire insurance letter
  • Settlement and Payment of Claims,

There are two forms of fire. In a way it is a boon for human life. Hence it is worshipped. It is lethal in its destructive form and is always present in the form of risk. Fire insurance is a human effort to get protection against the destructive effects of ‘agni’.

Various preventive and safety measures are adopted to reduce the risk of fire. It is a statutory requirement to have fire protection measures in almost all important buildings. Fire prevention measures are taken care of only in building construction and power supply equipment.

Arrangements are made for immediate notification of fire in industrial establishments and high-rise buildings. In all big cities, vehicles and personnel equipped with equipment are always kept alert for protection against fire. Even after that the possibility of fire always remains. Fire insurance is an excellent human effort to obtain protection against the risk of damage caused by fire in human material assets, crops, livestock, buildings, valuable materials, public utility service establishments and industrial undertakings.

Fire insurance is a measure in which the insurer undertakes to compensate the insured for damage caused by fire to the subject matter of insurance within a specified period of time, in exchange for a premium.

Therefore, fire insurance is a measure of protection against losses arising out of fire. It is a co-operative effort to share the loss of one person arising out of fire among different persons. Fire insurance is a contract of transfer of risk, in which the insurer promises to indemnify the insured against damage caused by ‘fire’ within a specified period of time in return for a specified consideration. Fire insurance is only a solution to meet the actual loss, profit cannot be earned from it.

According to Section 2 of the Insurance Act of India, 1938, “Fire insurance business, other than any other type of insurance business, means the making of insurance contracts, agreements against loss caused by or incidental to fire. Insurance contracts are also made against such loss which is caused by other events. And which is usually included in the risks of fire insurance.”

From the above definition it is clear that fire insurance is an indemnity contract. Under which in return for a certain consideration, the insurer undertakes to indemnify the insured in case of damage to a predetermined subject or thing due to fire or other stated reasons. Fire insurance being an indemnity contract, the insured party is entitled to receive only the actual loss or the insured value, whichever is less, in the event of a loss.

Meaning of fire – In fire insurance, where the insurer is claimed to indemnify for loss due to fire, fire has a special meaning. Agni in this context means a flame that appears suddenly. In fire insurance it has to be proved that the loss has been caused by the flame itself. For this it is necessary to prove two elements –

1. Flame must have appeared in the fire

2. The fire must be accidental.

Features or nature of fire insurance – Based on the definition of fire insurance given in the Indian Insurance Act, following are the main features of fire insurance –

  1. Personal contract – Fire insurance is considered a contract under the General Insurance Act. This certificate of insurance cannot be transferred without the permission of the insurer.
  2. In the form of return premium – The maximum fixed period of fire insurance is one year and after that it is necessary to renew the insurance letter if it continues. The premium for the insurance policy is assessed at one go and collected by the insurer. In case of damage, the insurance company compensates the financial loss greater than the amount of premium only.
  3. Protection against risk – In fire insurance, commercial and domestic properties are covered to protect against the risk of damage arising out of fire. The insurance company, bearing such risk, makes a promise of protection to the insured.
  4. Contract – A contract of fire insurance is a contract as per the Indian Contract Act, 1872. In this, the essential elements of a contract such as proposal by the insured, acceptance by the insurer, capacity to contract between the parties with free consent, legal consideration and purpose, fulfillment of legal formalities, etc., must be present. In this, the insured is called the promisor and the insurance company is called the promisee.
  5. Commencement of risk – In fire insurance, the risk is considered to be started as soon as the insurance company accepts the insurance offer, when the future date of commencement of insurance has not been fixed. Once the premium is deposited, the risk is considered to have started but if the insurance company has issued the fire insurance letter without depositing the premium, the risk starts as soon as the insurance letter is issued.
  6. According to insurance principles – Like life insurance and marine insurance, it is necessary to fulfill the principles of insurance, such as the principle of utmost good faith, the principle of insurable interest, the principle of indemnity and the principle of co-operation in fire insurance. According to these principles, there should be mutual trust between the insurer and the insured and they should honestly tell each other all the things to be mentioned in the proposal. Apart from this, at the time when fire insurance is taken, there should be interest of the insured in the subject matter.
  7. Issue of insurance letter – When the fire insurance contract is made between the insurer and the insured, the insurance company (insurer) issues the insurance letter. It bears the common seal of the company and the signature of the competent authority. The date of commencement of risk is the date mentioned on the insurance policy.
  8. Indemnity only on the origin of flame or heat – In a fire insurance policy, the insured receives compensation from the insurer only when the property is damaged by flames or combustion or heat. This fire must also have started accidentally. The insurance company will not cover the damage caused by a fire caused by or without illumination by any other party.
  9. More than one damage – If the period of one year from the date of issue of fire insurance certificate has not been completed and the business or domestic property is damaged many times during the insured period, then compensation can be obtained only up to the sum insured.
  10. Maximum amount of compensation – The insurer pays the insured an amount equal to the actual damage caused to the property by fire. Fire insurance cannot be made a means of earning profit. This is an indemnity contract. If the insurer takes multiple insurance papers from different companies for the same property or subject matter. Even then he would not be entitled to receive more than the amount of actual damages from all of them in the aggregate.

The important thing is that the damage done should not be repaired without the flame coming out. The insurer is not liable for damages in case of damage caused by heat or humidity in the warehouse or room, sun heat, electrical blockage, chemical impact, explosion, lightning or willful fire.

In a fire insurance letter, the insurer accepts the responsibility to indemnify the insured party on the loss of the insured by fire during the period of insurance.  Many risks are mentioned in the fire insurance letter.  To know the scope of fire insurance, it is necessary to know which risks are included in a simple fire insurance policy, and which risks are generally kept outside the scope of insurance. 

  1. General coverage –
    • Perils to be covered in a general fire insurance policy A general fire insurance policy covers the following perils –
      • Fire This includes damage caused by fire caused by explosion. 
      • Fire caused by electricity. 
      • Loss by explosion of boiler for domestic use only. 
      • Explosion of gas used for domestic purposes or for lighting or heating a building. 
    • Risks not covered in a general fire insurance policy Many risks are not included in a general fire insurance policy, that is, the insurance company is not responsible for the losses arising out of those risks.  The following are included under this –
      • Non-insurable goods – Goods placed on trust or commission, precious metals, jewels, art objects, manuscripts, maps, designs, samples, moulds, securities, documents, stamps, currency, cheques, account books and other business books, explosives Substance etc.
      • All such loss or damage related to events – earthquake, volcano, storm, cyclone, atmospheric disturbance or other natural disturbance, riot, rebellion, revolution, rebellion, war, attack, martial law etc.
      • Those losses which arise due to the following calamities: – During or after the fire, natural heating or self-combustion, combustion of property according to government orders, forest, forest etc., accidental or intentional combustion by fire.
  2. Comprehensive area – The insurer covers those risks under the broad scope of fire insurance. Which are not kept in the ordinary area. Insurance policies issued under this area are called special disaster insurance policies. In other words, those risks which are considered ‘ineligible’ to be insured under the general area are included in this area. In case of general fire insurance, only direct losses are covered and not indirect. Whereas in a wide area, indirect losses are also compensated, as protection against risk to indirect losses is included in the subject matter of these special insurance papers. The general and broad scope of fire insurance can be explained by an example. In an industry whose fire insurance is done under the general insurance policy, in the event of fire, the burning of machines and stoppage of production will affect the net profit, the industrial unit will have to pay the rent of the space, interest on the loans will have to be paid. And the permanent employees will have to pay salary, until the work is resumed. While the insurer will cover only the damage caused by fire in the industrial unit and will not cover the rest of the incidental losses as all the remaining losses are indirect which do not come under the scope of general fire insurance, at present the scope of fire insurance is very wide. And new policies are being issued by which direct loss as well as indirect losses are compensated.

While insuring for fire protection, the insurer should assess the risks and hazards associated with the insurance offered. On the basis of these perils, the insurer decides whether the insurance offer is acceptable or not and the premium to be charged for it. The term ‘hazard’ includes all factors that increase the risk. The greater the extent of the risk, the proportionately the risk. These crises can be divided into two categories. physical and moral. The quantum of risk and the rate of premium can be determined by evaluating both the categories of risks.
  1. Physical perils – In fire insurance, physical perils are related to house, shop, factory, godown, stock etc. and affect the possibility of loss of the insured subject matter. Information about these hazards is possible only from the information given in the offer letter, but if the information is not sufficient, then it can also be obtained by getting the surveyor inspected. First of all, the type of subject matter insured is looked at. The following are then taken into account to assess the material danger of the subject matter insured.
    • Construction related – Under this, it is seen that how and with what material the walls, roof and floor of the house are made, whether the construction work is old or new. If fire retardant materials and fire extinguishers are used in the house, then the material crisis is less in it. But the physical danger of a house built of wooden materials and other inflammable materials is more. More material distress is also found in multi-storey buildings.
    • Status related – For this the status of construction is considered. For this, the situation, settlement and area around the house is seen. The risk of fire is high if the subject is very close to an explosives manufacturing industry, an explosive material storage center or a gas warehouse, or is located in a place where there is no water. Where firefighting fleet facilities are readily available, the physical distress will be comparatively less.
    • Use related – In this it is seen that how is the use of that building? Buildings are used for housing office, shop, godown or factory etc. While doing fire insurance of the factory, it is necessary to see what is manufactured in that factory, which raw material is used, how the material is stored, as well as it is necessary to know what is the manufacturing process, which sources of power Tools are used, which chemical substances are used etc. While insuring the shop, it is necessary to see which items are usually stored in the shop. Mills, chemical laboratories and enterprises manufacturing explosives are more prone to physical hazards as compared to residential houses.
    • Lighting and heating – the condition of use of electricity and gas, failure of power lines, gas failure etc. should be considered. In institutions where work is done at night, the physical crisis increases even if there is a faulty system of artificial lighting and heating.
  2. Moral crisis – Moral crisis is a crisis created by human nature and character traits. There is a possibility of such hazards in fire insurance. Solving them was not easy. Moral crisis is manifested in the following forms –
    • When some people set fire to a house, warehouse or factory due to mutual hatred.
    • When the insured voluntarily sets fire to the property insured out of bad intention, it is called arson. In order to get the benefit of the claim, the insured can set fire to his property either himself or with the help of others.
    • In case of fire, the insured does not take any interest or is negligent in extinguishing the fire.
    • When the insured, out of bad faith or dishonesty, exaggerates the amount of his claim so as to make profit from the insurance. Thus, it is clear that the possibility of moral hazard is more in fire insurance than in life insurance. Therefore, the insurance company should accept the claim only after examining it very carefully so that human abuse can be avoided.
  1. There are three bases of classification of fire insurance papers, indemnity, quantity of goods and the risk involved. These bases and insurance papers have been described here.
    • On the basis of indemnity – On this basis, the following types exist in fire insurance papers
      • Average letter of insurance – It is based on the average principle of insurance. If the insurer under-insured the insured property, then in such a situation the insured party will also pay compensation on the basis of the ratio of the insured value and the actual value. The remaining loss will have to be borne by the insured himself.
      • Special insurance cover – This insurance letter does not have average condition. The insured takes fire insurance of a certain value from the insurer. In case of damage to the subject matter, the insured party indemnifies the actual loss or the insured value (whichever is less). When the property is double insured by the insured and the average condition is mentioned in one of the insurance policies, then in that case, the average condition will prevail on all the insurance policies, even if one of them is a specific insurance policy. Are .
      • Valuable Insurance Letter – In this insurance letter, the insured property is valued only at the time of insuring it. Appraised insurance is done for artistic and rare items, furniture etc. In case of destruction of the insured property in case of fire, no certificate regarding the value of the property has to be given by the insured party because the value of the insured property has already been determined. The insured party also does not have to bear the risk of price fluctuations at the time of loss of the insured items.
      • Letter of Restoration – In this letter of insurance, the insurer undertakes to deliver the party insured to the condition before the loss. Restoration of damaged property may be possible through new construction or repair. Restoration of the insured property depends upon the agreement between the insurer and the insured.
    • On the basis of quantity of goods – There are generally five types of insurance on the basis of quantity of goods. Which is as follows –
      • Declaration of Insurance – In this letter of insurance, the insured party takes insurance from the insurer by paying a temporary premium of 75 percent of the premium of the maximum estimated amount of goods to be held by him for a period of one year. Thereafter, the insured informs the value of his stock to the insurer every month. The average stock valuation is done by adding up the declared values ​​for all the months of a year and the premium rate is determined. The premium paid in excess is returned to the insured in case the declared value is less than the maximum estimated amount. In case of loss, compensation is made on the basis of declared value.
      • Movable Insurance Letter – This insurance letter is suitable for many institutions, such as traveling companies, circus theatrical circles, auctioneers, auctioneers etc. The goods of these institutions are kept in offices, godowns, stations, ports and different cities. A movable insurance letter is taken for the property which is spread over a wide geographical area. In the event of fire damage to the insured subject matter in the specified geographical area and within a specified period, the insured party is liable for compensation.
      • Adjustment Insurance – This insurance cover is suitable for those traders whose stock keeps on increasing or decreasing continuously. In the initial stage, this type of insurance is issued by insurance companies for a fixed price. Thereafter, the insured has the option to get the insurance done according to the decrease or increase in the stock. The insured party endorses this decrease or increase on the letter of insurance. There is no need to declare stock every month in this type of insurance letter. In case of decrease or increase only thrice in a whole year, the insured party shall get it endorsed on the letter of insurance. Indemnity is done only up to the value endorsed in this insurance letter.
      • Letter of Insurance with maximum value and discount – Under this, the insured decides the maximum quantity of his goods which he is likely to have in a specified period. After that he gets her insured. The insurer returns one-third of the premium paid at the end of the year to the insured as a discount.
      • Additional Insurance Letter – This is suitable for those businessmen whose stock changes from time to time, as well as there is a continuous decrease or increase in the market value of the stock. In this letter of insurance, two letters are issued to the insured. In the first, that quantity of stock is mentioned which usually remains with him. Secondly, it is issued for such amount as the elevation of value is likely to be in respect of the specified goods during the specified period.
    • On the basis of the risks involved – The insured can also take various types of insurance papers, such as general insurance, special risk insurance, comprehensive insurance, lateral loss insurance, based on the risks that the insurer has insured. e.t.c . The features of these insurance letters are described below.
      • General Insurance Letter – This insurance letter is issued for exceptional risks under fire insurance, under which the insured is covered for the actual loss up to the insured value in case of damage due to fire.
      • Special Risk Insurance – In this letter of insurance, the insurer accepts those risks, which are not accepted in the general insurance cover.
      • Comprehensive insurance cover – This insurance cover covers household items, electronic and electrical appliances such as radio, TV. V . VCR are issued for refrigerators, washing machines, computer equipment, etc.
      • Incidental loss insurance letter – In addition to general insurance, there may be many other types of indirect or incidental loss to the business class. Such losses are covered in the incidental insurance letter.
      • Sprinkler insurance letter – Pipes are installed in the walls to prevent fire in large industrial units. These pipes come out of the wall and some part of them remains open. In case of fire, the entire system is switched on. , Water starts sprinkling from the place where the pipeline is kept open. Here the insurer compensates for the damage to the subject matter due to fire, but in the event of rapid water spraying from this device, many things can get damaged. Spraying Equipment Insurance cover indemnifies the insured against such risk.
      • Public Liability Insurance Letter – This insurance letter is useful for large exhibition halls, repair workshops etc. The risk of the businessman remains until the expensive products kept in these are delivered to the buyers. This type of Burma letter involves the risk of even the delivery of the goods.

There is a certain process to protect the insured property from fire by the insured person or institution, it can be understood in the following order –
  1. Selection of insurance company – The person getting insured should make this selection first. From which company he will get the fire insurance for the possible risk.
  2. Filling of offer letter – The person taking the insurance letter should get the offer letter for fire insurance from the company or its agent and all the information required in it should be filled clearly and correctly.
  3. On receipt of the survey- proposal letter by the company in the office, the company decides on the basis of the agent’s report and other facts given in the proposal letter, how much risk is there in the insurance? If the risk is of normal level then the company can accept the offer letter, in case of high risk, it sends its inspector to survey the property site. The inspector takes stock of all the conditions of the property, the property site, the risk existing in the neighborhood, etc., submits his report to the company and the company assesses the risk on the basis of the report.
  4. Acceptance of offer letter – Based on the condition report of the inspector, the company decides whether to accept the risk or not. In case of acceptance, after determining the premium, informs the applicant to deposit the premium amount. Thereafter the proposer is asked to deposit the premium. He deposits the premium amount and obtains a receipt to this effect from the company. As soon as the receipt is cut, the contract of insurance comes into force and the risk of the insured gets transferred to the insurer.
  5. Cover letter – After receiving the premium, the company issues a temporary insurance letter, which is called a cover letter. The liability of the insurer in respect of the insured property starts from the date mentioned in this cover letter.
  6. Insurance policy – After that, the insurance company prepares the insurance letter for the insured, in which, apart from the necessary conditions, the name of the insured, address, occupation, sum insured, description of the property, value, term, amount of premium and policy number etc. Contains details. In the end, a letter of insurance is prepared and sent to the insured.

In fire insurance, initially the minimum conditions were included in the letter of insurance. Some companies used to issue unconditional insurance letters. The concept of unconditional letter of insurance was of no importance. Because in every insurance contract essential elements of general contract and special elements of insurance contract remain present.

After the increase in the number of fire insurance, the corporate body also started fire insurance business. Various conditions were found in the insurance letters issued by them. Therefore, there was a need to bring uniformity in the various conditions of the fire insurance letter. Thereafter a standard letter of insurance was prepared. A total of eleven conditions were mentioned in this standard insurance letter. The need for a standard fire insurance letter was felt in India also. For foreign companies doing fire insurance business in India, Foreign Standard Insurance Letter was prepared. This insurance letter is prevalent in our country at present. There are 20 conditions mentioned in this insurance letter. It is written in the foreword of the standard fire insurance letter itself that the insurer assumes the liability to cover the loss or damage caused by the following risks. 1. Fire, 2. Electricity 3. Explosion of a boiler used, 4. Explosion of gas.

The other conditions which remain printed in the fire insurance letter are mentioned here –

  1. False description – This condition is mentioned that there will be no false description in the insurance letter. As a result of misrepresentation in the letter of insurance, no legal relationship can arise between both the parties, the insurer and the insured.
  2. Payment of premium – Payment of premium in advance is necessary as per insurance legislation. This payment shall not be deemed to have been made until the premium payment receipt is given to the insured under the signature of the company’s authorized officer or agent on the form.
  3. Other insurances – When the insured has already taken out any insurance on the property or takes out any subsequent insurance, he shall inform the insurance company to this effect.
  4. Collapsed Building – If the insured building or any part thereof in which the property is situated or any substantial part of it collapses and so as to destroy its usefulness or increase the risk to the property contained therein, the contract of insurance shall forthwith cease, whether The insurance is on the building or any part thereof or the property contained therein or the rent thereof or any other matter connected with the building. Provided that this condition shall not apply if the building has been demolished due to fire.
  5. Excluded Losses – Condition numbers 5, 6 and 7 of the letter of insurance mention those situations in which the insurer is not liable for the loss or damage. In terms of condition number 5, the insurer is not liable for the following loss or damage: Loss by theft, loss or damage to property during or after a fire accident, loss or damage caused by natural heat or spontaneous combustion. Loss or damage to property resulting from its passing through the process of heating or drying. Loss or damage caused by burning of property or as a result of underground fire by order of Government officials. Loss or damage caused by nuclear fuel.
  6. Excluded Perils – The insured party will not be liable for the loss or damage caused by the following perils: earthquake, volcano and other natural calamities. Hurricanes, tornadoes and other atmospheric disturbances. War, attack, actions of foreign enemy etc. Rebellion, riot, revolution, martial law etc.
  7. Excluded property – The insured party shall not be liable for loss or damage to the following property unless it is specifically mentioned in the insurance policy: Goods placed on commission Gold, silver or jewels Art work of the value exceeding Rs.1000 Commodities Manuscripts, names, designs, moulds, samples, models etc. Securities, documents, stamps, coins, letters, currency, chak, account books or other business books, records of computer system Explosives Burning of forest, bush, forest etc. by fire .
  8. Alteration – When the article or property is insured and thereafter any alteration is made to that insured article, it is necessary to inform the insured of such change. If the change is likely to result in an increase in insurance risk, the insurer’s approval is necessary.
  9. Claim – Under this clause or condition, some important facts have been given in order to get the amount of compensation after the damage caused by fire, such as the insurer should be informed in writing as soon as the loss occurs. Within 15 days from the date of loss, full details of the loss should be submitted along with necessary forms of claim. Whenever any information or certificate is sought by the insurer in relation to the claim, it should be made available without delay.
  10. Fraud – Provided that if an insured has, at the time of making an offer of insurance, concealed any material fact or attempted to defraud, or has attempted to willfully destroy the property insured, or has caused loss in excess of the actual loss, If an effort has been made to get the fulfillment done, then it will be called fraud or fraud and as soon as this happens the other party will be free from his liability.
  11. Restoration – It is not mandatory that the insurer is bound to pay the amount of damage in cash if the insured item is damaged within a certain period. If the insurer so desires, he may restore the damaged goods.
  12. Rights of the company after the loss – According to this clause or condition, after the fire and before the payment of the claim, the insurer gets the following rights. Reaching the place where the damage has taken place and taking possession of the damaged item. To take possession of the necessary forms and documents related to the claim of damages.
  13. Substituting – This means that as soon as the insurer has paid the claim of compensation to the insured, the rights and remedies of the insured against the third party are transferred to the insurer and the insurer assumes the position of the insured. Takes .
  14. Contribution – According to this condition, if the same insured article is double insured, then in case of loss, all the insurers will cover the loss on a proportionate basis. The contribution of each insurer to the contribution can be determined by the following formula:- Insurer’s Liability = Sum Assured of Insurance Policy/Sum Assured of all insurance policies*Amount of Loss
  15. Average sentence – Sometimes situations also arise when the person to insure the goods. By apportioning the actual value of the property, it is insured for a lesser value. In the event of a loss, the insurer shall make good the loss on the basis of the proportion between the actual value and the insured value, the rest being borne by the over-insured.
  16. Undertaking – While filling the insurance proposal form, the insured person undertakes that whatever facts he has written are correct. This is called Samashvasan.
  17. Arbitration / Arbitration Sentence – This condition is also attached in the letter of insurance that if there is any difference of opinion between the insurer and the insured regarding the amount of claim, it will be settled by an arbitrator or arbitrator.
  18. Cancellation – This condition gives the right to the insurer or the insured that either of them may give notice to the other party to cancel the letter of insurance. The insurance policy shall stand canceled on giving such notice
  19. Payment of premium – This condition draws attention to the fact that the premium shall be deemed to have been paid by the insured only when he has a clear receipt to the effect that he has paid the premium. has been deposited.
  20. Notice – If any notice is given in compliance of any condition given under the insurance policy, it should be given in writing and not orally.

When any damage is done to the insured property due to the risks included in the insurance policy, the insurance company is responsible to the insured to indemnify it. The insured party takes action to get compensation for the loss of the insured property. Before the settlement of the claim, the insured has to take adequate measures to prevent it in case of fire, after which he has to submit the claim within the prescribed period. The insurance company pays after surveying the claim submitted. The procedure for payment of claim is as follows.
  1. Insured’s duty – As soon as the insured property catches fire, the insured is required to inform the fire station. The insured must take all such measures to protect the property from damage as a person of ordinary prudence would have used in the circumstances to protect his property. If he does not do so, it would indicate the fact that he had no insurable interest in the property insured and the insurer would be absolved of the liability to indemnify in the absence of insurable interest as per the essential elements of the contract of insurance. Therefore, the first duty of the insured is to make all possible efforts to extinguish the fire as soon as it starts.
  2. Informing the insurer – The insured should thereafter inform the insurance company of the fire in the insured property as soon as possible. If the insured does not give notice to the insurer within a reasonable time having regard to the facts and circumstances of the case, he shall not be liable for indemnity.
  3. Submission of Claim – The claim should be submitted within 15 days after intimation to the insurance company. In this form, information is given by the insured to the insurance company about the location, time, circumstances, estimated damages, steps taken for fire fighting, etc. Along with this necessary proofs should also be attached. The report of the fire station in fire insurance is important in this regard.
  4. Survey and Evaluation – After receipt of the claim, the insurance company starts the process of survey and evaluation. Under this procedure, the appraiser of the insurance company inspects the place where the insured property has been damaged by fire. Along with this, those circumstances and reasons are studied and analyzed as a result of which the fire started. The insured is bound to cooperate with the valuer in this process. After completing the investigation, the appraiser submits his report regarding the damage to the insurance company. Appraisers are independent persons having prescribed qualifications.
  5. Determination of compensation – After the survey and evaluation, the most difficult task for the insurance company is to determine the amount of compensation to be paid to the insured. To determine this, the claims presented by the insured, the evidence presented, the appraiser’s report serve as the basis. Based on this, the insurance company assesses the actual damage and determines the amount of compensation. When the insured property is damaged more than once in a year, the liability of the insurance company shall remain the same to the extent of the sum insured after deducting the amount of compensation done earlier. In case of double insurance, the liability of the insurance company is fixed on a proportionate basis.
  6. Payment of claim amount – After determining the amount of reimbursement, the insurance company pays the claim amount. Usually the claim amount is paid out of money order, but it is up to the insurance company which option it opts for. In addition to payment by money order, the insurance company can also restore the damaged item.
  7. Arbitration – In case of dispute arising between the insured and the insurer regarding the amount of the claim, the settlement is done by arbitration. If the arbitrator also fails to resolve the dispute, then the parties can take refuge in the court.
  8. Post-settlement action – After compensation, the repatriation principle automatically applies. By this effect the insurance company assumes the rights enjoyed by the insured against third parties in respect of the insured property.

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