Define fire insurance and discuss the essentials of a valid fire insurance contract

Fire Insurance :-
Fire insurance is a contract between the policy holder and insurance company, in which the insurance company undertakes the indemnity caused by a fire to the particular property in the particular period. The premium is also fixed in contract. The insurance company will compensate the loss but not more than the insured amount.

Essentials or Principles of Fire Insurance

1. Insurable Interest :-
The insured must have insurable interest in the subject matter when the loss takes place. For example owner of the Car has insurable interest and not a driver.

2. Absolute Good Faith :-
All the facts about the subject matter should be disclosed by the insured to the insurer. The contract will be invalid in case of fraud.

3. Contract of Indemnity :-
It is a contract of indemnity. When the amount is claimed after the loss has occurred. Insurance company compensates the loss up-to the insured amount limit. If there is no loss than no claim is acceptable.

4. Personal Right :-
A man whose name is mentioned in the contract, he has a right to receive the insured amount from the company in case of loss.

5. Personal Contract :-
It is a personal contract between the insured and insurer. This contract can not be transferred without the consent of insurance company.

6. Direct Loss :-
It is a specified that loss by the fire should be direct and fire should be immediate cause of loss.

7. Particular Period :-
he contract of fire insurance is for a specific period, usually for a one year.

8. Description of Property :-
It is also an essential part of the contract . The location of the property should be described in the contract.

9. Premium Consideration :-
The policy must mention the sum of insurance and the rate of premium.

10. General Conditions :-
A prescribed form should be used for the fire insurance. Both parties should be competent to contract. The object of contract should be legal and not against the public interest.