Concepts of Fire and Marine Insurance

Insurance other than life insurance is called general (or non-life) insurance. Here the loss insured against may or may not happen, and the aim is only to indemnify — to place the insured, so far as money can, in the same position he was in before the loss, never to let him make a profit out of it. Two of the oldest and most important branches are fire and marine insurance.

Fire insurance

A fire insurance contract is one in which the insurer, in return for a premium, agrees to indemnify the insured against loss or damage to property caused by fire during a stated period, up to the sum insured. Its main features are:

• Contract of indemnity. The insured can recover only the actual amount of loss, not more than the sum insured, and only if he has an insurable interest in the property.
• Property covered. Buildings, machinery, stock, furniture and goods can be insured against fire, lightning and (by extension) allied perils such as explosion, riot or flood.
• What is a "fire". For a claim, there must be actual ignition (visible flame or burning), the fire must be accidental (not deliberately caused by the insured), and the loss must be a direct consequence of the fire.
• Utmost good faith and proximate cause. All material facts about the property must be disclosed, and the fire must be the proximate (nearest effective) cause of the loss.
• Average clause. If a property is under-insured (insured for less than its full value), the average clause makes the insured bear a proportionate part of the loss himself, so that under-insurance is discouraged.

Marine insurance

A marine insurance contract is one in which the insurer agrees to indemnify the insured against losses incidental to a marine adventure — that is, losses to ships and cargo, and freight, caused by the perils of the sea. It is the oldest form of insurance. Its main subjects and terms are:

• Subject-matter — the three interests. (i) Hull insurance — on the ship itself; (ii) Cargo insurance — on the goods carried; (iii) Freight insurance — on the freight (carriage charges) the shipowner would lose if goods are not delivered.
• Perils of the sea. Storms, collision, sinking, stranding, jettison (throwing cargo overboard to save the ship) and piracy are typical marine perils.
• Contract of indemnity and insurable interest. As in fire, the insured recovers only his actual loss and must have an insurable interest, though in cargo policies interest need exist only at the time of loss. …