Steps Or Process Of Effecting Fire Insurance Policy

A number of steps must be taken to enter into a contract between the insurance company and the insured to indemnify the property of latter from the risk of fire. These are called procedures of effecting the fire insurance policy. 

The following are the important steps that must be taken to buy a fire insurance policy.

1. Submission of proposal

An intending person must fill up the printed proposal form which is distributed by the insurance company free of cost. The proposal form solicits, in addition to the name and address of the proposer, other particulars concerning the object to be insured and the physical and moral hazards involved in it.

2. Evidence of moral character or responsibility

Since a fire insurance contract involves moral hazards, the insurance companies may ask for documentary evidence of moral character and responsibility of the proposer issued in his favor by respected persons or agencies. Many insurance companies do not ask for it these days, however. But if required, it must be enclosed with the proposal form.

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3. Survey and physical verification

After receiving the proposal, the insurance company sends the surveyors for physical verification of proposed insurable object. While verifying the object physically, the surveyors have to see the location and the arrangements made for the protection of the insurable object.

4. Acceptance of proposal

The insurance company accepts the proposal of the risks deem insurable after the assessment of the survey report and the evidence of respectability. Accordingly, a letter of acceptance is written to the proposer instructing him to pay the premium.

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5. Payment of premium

The proposer makes the payment of the specified premium at the specified time. Upon receiving premium, the insurance company issues the installment receipt together with the cover note which acknowledges the acceptance of the proposal by the insurance company. The cover note is also called interim protection note.

6. Commencement of risk

The liability on the part of insurance company begins right from the date of issue of interim protection note. It is usually written for a period of 30 days in lieu of the policy document according to which the fire risks of the insured are borne by the insurance company. It is automatically cancelled from the date of the issue of policy document.

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7. Issue of fire insurance policy
The insurance policy takes sometime to get it ready. After its preparation during the period covered by the cover note, it is sent to the policyholder. The fire insurance policy document includes everything concerning the terms and conditions of the contract and is useful in ascertaining the mutual rights and duties of the insurer and insured.


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