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What are the principles of fire insurance?

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Devashish Shrivastava Top Contributor
Undergraduate student | Content Writer

Few principles of fire insurance are;

  1. Insurable Interest in Fire Insurance.
  2. The principle of Good Faith in Fire Insurance.
  3. The principle of indemnity.
  4. Proximate Cause of Fire Insurance.
  5. The doctrine of Subrogation.
  6. Warranties in Fire Insurance.

(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.