Fire insurance (Part III)

Mon, 24 Jul 2017 12:49:24 +0000

KNOWLEDGE can change the heart, and the heart can change the mind……. You have worked hard all your life to have the possessions that you deserve, so why put all that in danger by failing to have adequate insurance coverage against fire, whether by accident or by arson (deliberate)?

Fire is a common place occurrence, but this does not mean that it will happen to you one day. The fact is that, there are essentials such as favourable probability, motive and opportunity at play for every fire outbreak that occurs.

If what I call the “triplets” namely; probability, motive and opportunity are not synchronised or timed, fire does not breakout, whether by chance or by design.

If an arson has a motive, an opportunity and a probability or chance that no one will observe (notice) him/her setting your building ablaze, he/she will go ahead and light the fire. If you live in a house, or indeed any building, that is poorly wired, and with poorly insulated electrical cables, the probability or chance of a fire outbreak are high, and one day you may wake up to witness the bitter reality of your house/building in flames.

Because it is rare for these three essentials namely; probability, motive and opportunity to occur together at the same time and favour fire, most of us ignore the possibility of a fire outbreak in our markets, corporate buildings and indeed in our own Homes.

So if fire ever breaks out, having your fire insurance policy to cover your financial losses is a big physical and psychological relief. Fire insurance is a critical safety net that nobody should do without.

Better still, history has shown us that, when you have fire insurance cover, your enemies or rivals, both real and imagined are unlikely to avenge themselves on you by torching your premises.

This is for the simple reason that your insurance company would restore your building, market or trading place to its original state, or the state that it was in, immediately before the fire outbreak. Therefore, fire insurance coverage discourages arson.

In the case of a home, along with replacement and reimbursement of burnt belongings, fire insurance cover can also provide financial assistance in finding and renting a new place to live and compensating the insured party for losses not covered under a home owner insurance plan.

Your home is probably your most valuable asset. Failing to insure it against damage occasioned by fire could put you in an insecure financial situation if you leave yourself with no recourse in the event of a fire outbreak.

Like earlier stated, fire accidents are very much unexpected but heavily destructive, because fire is a cruel master. Hence, having fire insurance cover is very much essential.

The fire insurance policy will cover your home‘s structure, fixing and fittings, and provides you with the financial resources to replace what you have lost, so that you can get back to normal as soon as possible.

If the worst were to happen and you found your house in rubble, consumed by fire, where would you go? Naturally, knowing that you have relatives who will come in to help you out during such a difficult time is great, but if you do not have such resources, what would you do? This is where you need a fire insurance policy in place.

Fire insurance provides the security for home, stock, furniture, business buildings, and so on. It provides the cost of replacement of properties and assets, which get damaged due to fire accidents.

For example, if your home is destroyed or damaged enough by a fire to the point that it renders you homeless, a fire insurance policy will often pay for the reasonable increase in your living expenses, such as the additional cost of hotel stays, restaurant bills, and so on.

Secondly, if you had property for illustration’s sake worth K200,000 then your insurance company can be able to restore you to the same old position. Gaining back your momentum would be very easy as you may just have to rebuild what you had once more. These are some of the benefits of having fire insurance cover in place.

It is bad enough to see your house burn down due to some unavoidable fire accident, or arson, but when you do not have an insurance cover to help you slide back to your normal life, this experience can be traumatic, to say the least.

Having said that, it is worth while to consider the importance of a fire insurance cover, especially if you know you cannot afford to replace your house using your personal finances.

One of the major benefits of fire insurance in general is coverage of belongings that are destroyed in a fire. This includes major appliances within the home, furnishings, clothing, jewelries, and other items of value that are specifically covered within the terms of the policy.

The following are the fundamental principles essential for a valid contract of fire insurance. It is a contract of indemnity: Its objective is to place the insured as far as possible in the same financial position after a loss as that occupied immediately before the loss. The insured can recover only the amount of actual loss subject to the sum assured.

With fire insurance, the insurable interest must exist at the time the insurance policy is signed as well as at the time of the loss. The interest, however, may be legal or equitable or may arise under a contract of purchase or sale.

The following have been held to have insurable interest in the subject matter: The owner, Mortgagee, Trustee, Executor, Warehouseman, Common, Bailee, Pledgee, Person in lawful possession, Finder, Insurer, Commission agent where the agency is coupled with interest and Tenants who are liable to pay rent after a fire. It should however, be noted that persons can insure only to the extent of such limited interest.

Amongst the principal types of fire insurance policies are the following: Valued policy; this is when the agreed value of the subject matter is mentioned in the policy. This value may not necessarily be the actual value of the property. In the event of a loss by fire the insurer pays the admitted value of the property.

An unvalued policy is one in which the value of the subject matter is not declared at the time the policy is taken. But in case of a loss through fire the value is computed by assessment. This is also called an open policy.

In the case of a specific policy, the property is insured for a definite sum. If there is a loss, the stated amount will have to be paid to the policyholder. But the actual value of the subject matter is not considered in this respect.

For example, if a policy is taken for K20,000 upon a building whose actual value is K100,000 and a fire occurs causing a loss amounting to K20,000, the insurance company will pay for the loss amounting to K20,000 irrespective of the fact that the building was insured for one fifth of its value.

On the other hand, an average policy is one which contains the average clause. This clause requires the insurance company to pay only that portion of the loss which is borne by the insured amount to the actual value of the subject matter of the insurance.

For example, if the value of a given property is K100,000 and it is insured for K60,000 (60% of the total value). If it happened that fire broke out and the amount of loss was K60,000. The insurance company would not pay K60,000 to the policyholder but would only pay 60% of K60,000 which would come to K36,000.

Furthermore, a floating policy is that which covers the fluctuating risk of several goods that lay in different localities for supply to various markets. Such a policy is usually taken out under one sum and one premium by the business person whose goods lay at docks and warehouses.

Then we have the stock declaration policy: this policy is taken for covering stock where great fluctuations in the value can happen throughout the contract period.

On such a policy, 75% of the premium has to be deposited in advance. The maximum liability of the insurance company is specified in the insurance policy. At the end of the year, the average stock and final premium is calculated.

There is also a loss of profit policy: this policy covers any loss of profit which occurs as a result of fire. This policy is also known as a consequential loss policy.

Further, the standard fire policy is issued for compensation of all direct loss or damage caused by lighting and burning. Such a policy also covers damages by rioting, explosions, cyclone and earth quake, to mention but a few eventualities.

The schedule policy insures many properties under collective terms and conditions. Details of the properties and their respective rates of premiums are listed in one policy only for the convenience of the insured.

Fireplace insurance is the type of insurance coverage, in which an individual pays a sum of money to an insurance company, in exchange to receive insurance coverage for the fireplace losses. While fire insurance provides coverage for the home, home furniture, enterprise buildings and so on, fireplace insurance provides the price of alternative properties and assets which get damaged due to fireplace incidences.

Fire insurance provides cover for damaged buildings. It provides cover, if any home furnishings are damaged due to fireplace incidences, like plywood, carpets and clothes.

It provides alternative or maintenance price for the electronic items, which are broken due to the fireplace incidences, like television sets, computers, air conditioners and so on.

The expectations of living have definitely changed with the times and indicate that more people look for paths that can lead to some benefits. Especially that there are so many kinds of insurance products available on the market, some select to leave fireplace insurance, stating that the likelihood of a fireplace developing are distant.

Protecting property or home from fireplace is essential, more so if you know the chance of one developing is very real. The age of property usually brings more fire accident possibilities. Age predisposes homes to have some substandard electrical wiring, or some plumbing that leaks which could result in short circuits and eventually fire outbreaks.

It is worrisome and bad enough when your home burns down due to some inevitable fire incident.  It is even worse, when you do not have an insurance plan to help you move back to your way of life. With that being said, it is well to consider the significance of a fire insurance plan. You have every right to list the essentials of the insurance plan that suits you, indicating what you want protected in the insurance plan, and what to be overlooked.

If you cannot get your kind of insurance plan with one insurance provider, there are always so many others to select from, who will offer you insurance that meets your wishes.

In this life, few risks could be more dangerous than accidental fire and arson. This is why high risk buildings are recommended to take fire insurance to make sure they are well covered for such perils.

Basically, fire insurance can provide complete cover against fire damage to the property and its items such as furniture and electronic appliances.

Further, there are other accessories that go with fire insurance that you have to be aware of. Although they will cost you a little bit more on charges, these may prove to be important in the future. Such accessories cover legal fees and replacement of personal belongings.

Fire insurance caters for the cost of damage for a building, if any home furnishing is damaged due to the fire incident, it provides alternative maintenance for the electronic items like television sets, computers, air conditioners, which get destroyed by fire. Actually, having fire insurance cover can save you from a financial disaster. Look out for part IV.

Note: In this column I offer general insurance information. Do not completely rely on this column in making insurance decisions. Visit a duly licensed insurance consultant or an insurance company for specific information regarding a policy or for any other additional information.

The author is a Consultant with Insurance Culture Consultancy, Lusaka. Email; insuculture@gmail.com