(i) In fire insurance, the insured must
have insurable interest in the subject
matter of the insurance. Without
insurable interest the contract of
insurance is void. In case of fire
insurance, unlike life insurance
insurable interest must be present
both at the time of insurance and at
the time of loss. For example, a
person has insurable interest in the
property he owns, a businessman
has insurable interest in his stock,
plant, machinery and building, an
agent has an insurable interest in
the property of his principal, a
partner has insurable interest in the
property of a partnership firm, and
a mortgagee has insurable interest
in the property, which is mortgaged.
(ii) Similar to the life insurance
contract, the contract of fire
insurance is a contract of utmost
good faith i.e., uberrimae fidei. The
insured should be truthful and
honest in giving information to the
insurance company regarding the
subject matter of the insurance. He
is duty-bound to disclose
accurately all facts regarding the
nature of property and risks
attached to it. The insurance
company should also disclose the
facts of the policy to the proposer.
(iii) The contract of fire insurance is a
contract of strict indemnity. The
insured can, in the event of loss,
recover the actual amount of loss
from the insurer. This is subject to
the maximum amount for which the
subject matter is insured. For
example, if a person has insured his
house for Rs. 4,00,000 the insurer
is not necessarily liable to pay that
amount, although the house may
have been totally destroyed by fire;
but he will pay the actual loss after
deducting depreciation within the
maximum limit of Rs. 4,00,000. The
purpose being that a person should
not be allowed to gain by insurance.
