If you went from asking what is home insurance
to buying a home insurance policy, you should pat your back. This is a wise decision and will protect your financial wellbeing even in the case of damage caused to your house by man-made or natural causes.
However, you should understand the impact of fire incidents and how they impact your home insurance policy coverage. As per estimates calibrated over the years, close to 45% of homeowners eventually file for a fire-induced damage cover. If your home insurance policy does not cover such incidents, you may face financial constraints despite the adequate cover.
Does Home Insurance cover fire?
The short answer is – it entirely depends on your policy. Several comprehensive cover policies will include damages caused by a fire that can be natural or man-made in nature. However, other than the comprehensive plans, many ordinary home insurance plans will not cover damages induced by fire. You can either get additional cover or buy an individual fire insurance cover for your home for such cases.
How Does Home Fire Insurance Work?
Here is a simple illustration to help you understand how does home fire insurance work:
"Piyali bought a new lakeside town-home with some of her savings and inherited money. She had a job in Delhi, but she thought she would rent the lakeside home and get passive income on the same. She ran it for a year and was happy with the profits. That was when she got in touch with a restaurant owner who had a property just beside hers. They started a partnership to help her guests dine at his restaurant, and in due course of time, he told her about getting fire insurance.
At first, she was sceptical since paying her home insurance quotes
would decrease profits at the end of the year. But the restaurateur was experienced, and she decided to take his word seriously and got a home fire insurance policy for her lakeside home that she would frequently rent.
A couple of years later, an accident near her home burnt almost the entire property down. She was startled by the incident but was relieved when the insurer informed her that she would get considerable compensation for both her property and the contents of the property.”
This way, it is easy to understand that home fire insurance can serve as a saviour even if your property gets affected by an unforeseeable incident.
What are the Types of Fire Insurance Covers Available in India?
You should explore the types of fire insurance covers available in India since each variant will have its by-laws that dictate the home insurance
fire coverage you can get. Here are some of the most common variants available in India:
Fixed Value Insurance: Here, the value of the property and the contents is already determined. Based on this, the premiums are calculated. When and if an incident occurs, the insurer compensates for the damages as far as the claimed amount is lesser than the earlier determined value.
Floating Policy: This variant is ideal for business owners and operators who have goods stored in different locations. All the goods are registered under one name and covered under one amount. If they get damaged by fire, the insurance cover compensates for value within the goods' earlier calculated value.
Consequential Loss of Profits or Gains Cover: This particular variant is ideal for businesses. For instance, suppose you are running a small bike modifications unit in a rented store with machines provided to you on rent by your landlord. The store catches fire for no particular reason, and your landlord now has a considerable set of overheads to make the store usable again. If she has a consequential loss of profits or gains, she will get compensated for the store's infrastructure costs and get some recovery of the gains or profits she could have realized with the inventory sale.
Replacement Cover: This fire insurance format covers the costs you will have to incur if you replace the valuables you have lost in the fire. The valuables can include all the considerable contents of your house. The only catch is that some policies consider the depreciated value of the asset while the other works on market value.
What is Not Included in the Fire Insurance Policy?
- Spontaneous Combustion
- Nuclear Accidents
- Damages Caused by Electrical Appliance Failure
- Damages Caused by Terrorist Activity, Civil War, War-Like Situations, etc.
- Natural disaster-induced fire
- Does Home Insurance cover fire?
Fire-induced damages are covered only in comprehensive home insurance policies. Fire insurance is hence the preferable option.
- Who Can Own a Fire Insurance?
If you own a building or its contents, or a business or its contents, you would be eligible to get fire insurance (assuming you fulfill the other given criteria).