fire insurance policy - Protecting Your Personal Investment

When arranging for a fire insurance policy on your property, you need to understand some fundamental principles on how insurance works. One of the fundamental principles of insurance is the principle of indemnity. The principle of indemnity means that the insurance company will compensate you base your your losses before the incident happens, and not better. Simply put you cannot make profit out of insurance cover.

Most basic fire insurance policy will indemnify the house owner in the event that the property insured is destroyed by

1. Fire
2. Lightning
   
3. Domestic gas explosion

This might be differed in different countries, but the basic cover of fire insurance policy remains the same. The occurrence must be under any unforeseen circumstances, i.e. accidental and not intentional.

In order to adequately cover your losses in the event of a fire and be able to build back your house, you need to determine an optimum sum insured. The determining factor is to ask yourself this question "What would be the cost of building the house back to it original state if it is totally destroy by fire? This sum normally excludes the cost of the land, the foundation, drainage and sewage system that might not be destroyed by fire.

t is always safer to insured a little higher than the cost of repairs or to reinstate the building but not too much higher. To insure a sum much higher than it should be will be a waste of money as insurance company will not pay more than what is justify. It would be ideal if you have a valuation report as , the valuation report will indicate the sum insured of a property which is much lower than the price you paid for the house You can just insure the recommended valued by the valuation company and this value will be a yardstick on the cost of the building in the event of a fire.

In all cases, always insured through a reliable and qualified insurance consultant and if in doubt, check with the relevant authority in charge of insurance.

Source: http://EzineArticles.com/?expert=SK_Wong