How To Compare Effectiveness of A Fire Insurance Policy

Standard fire insurance policies protect against domestic fire hazards, man-made perils and natural causes like lightening, storm, cyclone etc. Policyholders are reimbursed the cost, after an assessment is done about the damage caused to the dwelling, by the insurers. There are some specialized fire policies that cover surrounding structures as well as displacement of the residential units.

What does a fire insurance policy cover?

A fire insurance policy is recommended for self-occupied homes, rented accommodations and properties purchased for investment purposes. It is also recommended to include fire insurance if you have taken a home loan; as a small amount of additional premium will protect your property against fire damage. If you keep valuables at home, it becomes important to protect your precious belongings against the fire hazards.
The insurer evaluates how much it would cost to reconstruct the house if it is damaged due to fire. The assessment of valuables like jewelry, furniture, expensive wardrobes is also taken into consideration. A good fire insurance policy also covers an additional cost – if the owner does not have the resources to live in another dwelling or use the current property because of the damage caused.

 Things to be kept in mind while comparing the different policies:

  • A typical fire insurance policy covers the policyholder against the damage occurring due to electrical short circuit, kitchen fires, explosion of gas, bursting of water tanks or pipes, and natural disasters.
  • While comparing policies, ask the insurance company if they pay compensation for valuables as per the market value for each item. As a responsible policy holder, you must evaluate the valuables at home on yearly basis to determine if there is a need to increase the coverage under the fire policy.
  • The insurer reimburses the compensation on replacement basis if property is lost, or on an actual cash basis if it is damaged. Thus, it is better to opt for an insurer who will reimburse you for the current market value of the property, in case of total loss to the property.


  • Most of the fire insurance policies have exclusions such as fire caused due to war, terrorism or riots.
  • A fire insurance policy is usually valid for a year and you must renew it before it lapses to avail maximum benefit of the coverage.

Choosing an effective fire insurance policy requires you to compare the coverage and premium offered by different insurers. Document your valuables as it is easier for the insurer to determine the value of the items damaged. A policy should provide coverage from internal and as well as external source. In order to compare different fire insurance policies, it is advisable to compare online from a reliable insurance aggregator.

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