The principal types of fire insurance policies are given.

below: (learn any 8)

1. Valued policy

When the agreed value of the subject matter is mentioned in the policy is named as
valued policy. This value may not necessarily be the actual value of the property. In the
event of toss by fire the insurer pays the admitted value of the property.

2. Unvalued policy

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

3. Specific policy

In case of specific policy, the property is insured for a definite sum. If there is 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 examples if a policy is taken for Rupees
20,000 upon a building whose actual value is Rs.1,00,000 and afire occurs causing the
amount of loss Rs.20,000. The insurance company will pay the whole amount of loss of
Rs.20,000 irrespective of the fact that the building was insured for one-fifth of its value.

4. Average policy

An average policy is one which contains the average clause. This clause required 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 a value of
the property is Rs.1,00,000. It is insured for Rs.60,000 (60% of the total value) and the
amount of loss is Rs.60,000. The insurance company will not pay Rs.60,000 to the
policyholder but will pay Rs.36,000 (60% of Rs.60,000).

5. Floating policy

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

6. Stock declaration policy

This policy is taken for covering the stock where great fluctuations in the value can
happen throughout the contract period. On such policy 75% of the premium has to be
deposited in advance. The maximum liability of insurance company is specified in the
policy by the insured. At the end of year the average stock and final premium is
calculated.

7. Loss of profit policy

Such type of policy covers the loss of profit which sustains as a result of fire. This policy
is also known as consequential loss policy.

8. Standard fire policy

This policy is issued for compensation of all direct loss or damage caused by lighting
and burning. Such policy also covers damages by earthquake, hair flood, explosion,
cyclone and riot.

9. Reinstatement policy

Under this policy insurance company pays more than the actual value of the property
destroyed by fire in order to cover the cost of replacement of the said property. It is also
called as “Replacement Policy”. This type of policy is not very common in these days.

10. Schedule Policy

A schedule policy is one which insures many properties under collective terms and
conditions, Details of the properties and their respective rates of premium are listed in
one policy only for the convenience of the insured.

11. Sprinkler leakage policy

This type of policy covers the loss of building as a result of the damage by he

leakage of liquid or water.

12. Excess policy

This policy is issued for the stock of merchandise whose value is constantly fluctuating.
In such case it is not suitable to take one policy for certain sum. So the insured takes an
ordinary policy for minimum value of the stock and excess policy for excess value of the
stock. The actual value of the stock will be reported periodically
13. Maximum value with Discount policy

Under this policy one third discount of the premium paid is refundable to the insured at
the maturity of the policy. This policy covers the risk for maximum amount.

The major types of marine insurance policies are (learn 8)

1. Time policy

A time policy is taken for definite period of time, usually not exceeding 12 months say
fromJanuary 1, 1981 to December 31, 1981. This policy is most suitable for hull
insurance.

2. Voyage policy

Where the subject matter is insured for a specific voyage, say from Karachi to Port
Saeed it is named as voyage policy.

3. Mixed policy

This policy is the combination of time and voyage policy. It, therefore, covers the risks for
both particular voyage and for a stated period of time.

4. Floating policy

Floating policy is taken for a relatively large sum by the regular suppliers of goods. It
covers several shipments which are declared afterwards along with other particulars.
This policy is most situated to exporter in order to avoid trouble of taking out a separate
policy for every shipment.

5. Valued policy

Under its terms the agreed value of the subject matter of insurance is mentioned in the
policy itself. In case of cargo this value means the cost of goods plus freight and
shipping charges plus 10% to 15% margin for anticipated profit. The said value may be
more than the actual value of goods.

6. Unvalued policy (Open Policy)

Where the value of the subject matter of insurance is not declared but left to be
ascertained and proved later it is called unvalued policy.

7. Builder's risk policy

This policy is issued for more than one year. This covers the risk of damage to vessels
from the time its construction commences until its trail is completed.

8. Blanket policy

Under the condition of the blanket policy the maximum limit of the required amount of
protection is estimated which is purchased in lump sum. The amount of premium is
usually paid in advance. This policy describes the nature of goods insured, specific
route, ports and places of the voyages and covers all the risk accordingly.

9. Port risk policy

This policy covers all the risk of a vessel while it is standing at a port for particular period
of time.

10. Wager policy

Where the assured has no insurable interest in the subject matter of insurance that is
know as wager policy. As this policy has no legal effect so it cannot be taken to a court
of law. If underwrite refuses to accept the claim the policy holder cannot take any legal
action against him. It is, therefore, also called as gambling policy.

11. Special hazards policy

This policy covers special risks incident to piracy and war. It provides protection to
insured under agreement against seizure, capture, detention and other war risks.

12. Composite policy

This type of policy is purchased from more than one under writers. If there is no any
motive of fraud then insured will be indemnified by each under writer separately in case
of loss.

13. Block policy

This policy is particularly purchased to gold diggers. It covers all the risks of damage to
gold from the time of its recovery to its distinction. This types of policy has been
introduced in Africa and is very popular in the mine fields of gold

Characteristics of Insurance

 It is a contract for compensating losses.

 Premium is charged for Insurance Contract.
 The payment of Insured as per terms of agreement in the event of loss.
 It is a contract of good faith.
 It is a contract for mutual benefit.
 It is a future contract for compensating losses.
 It is an instrument of distributing the loss of few among many.
 The occurrence of the loss must be accidental.
 Insurance must be consistent with public policy.
 Transfer of Risk: The risk is transferred from the insured to the
insurer.
 Indemnification: The insurer is restored to his or her approximate
financial position prior to the occurrence of the loss.
 Payment of unforeseen, unexpected and accidental loss. Insurance
does not cover intentional loss.
 Pooling of Losses: This means sharing of losses incurred by few over
the entire group, so that process average loss is substituted for actual
loss.

Nature of Insurance
 Sharing of Risks
 C0-operative Device
 Valuation of Risk
 Payment made on contingency
 Amount of Payment
 Large Number of Insured Persons
 Insurance is not gambling
 Insurance is not charity
Functions of Insurance
Primary Function
 Provision of certainty of payment at the time of loss
 Provision of protection
 Risk sharing
Secondary Function
 Prevention of loss
 Provision of Capital
 Improvement of efficiency
 Ensuring welfare of the Society