Fire Insurance

Ordinarily, fire insurance covers loss or damage to property by fire. Lately, however, the coverage has been expanded (extended coverage subject to additional premiums) to include some or all of the allied risks (lightning, explosion, flood, earthquake, etc.) and may even include a special coverage known as "loss of profits or business interruption insurance." This special coverage indemnifies unrealized profits due to fire.

Fire Insurance vs. Marine Insurance

1.) The rules on concealment and misrepresentation in marine insurance are stricter than in fire insurance

2.) Constructive total loss and abandonment apply to marine insurance but not to fire insurance

3.) In marine insurance, if the insured insures his property for less than its actual value and a partial loss occurs, he becomes a co-insurer of the uninsured portion of the property (doesn't apply to fire insurance unless given in the policy)

If the fire insurance policy has an "option to rebuild" clause and the insurer chooses to rebuild rather than pay, he can't back out of it even if the cost of rebuilding is more than the amount agreed on in the policy.

Remember this also: (in relation to #3 above) if the insurance policy's value is less than the value of the insured property and that property is partially destroyed, the insurer will pay only from the fund stated in the policy. If the loss is still greater than the amount in the policy, the insurer isn't liable for the deficiency because property insurance is a contract of indemnity.

So if you insured your Php2 million house for only Php1 million and 3/4 of it was destroyed, the insurance company is liable only for Php1 million. If 1/4 was destroyed, the insurance company is answerable only for Php500,000.