Difference between life Insurance and Fire Insurance

Difference between Life insurance and Fire insurance min 1024x576 - Difference between life Insurance and Fire Insurance

The difference between Life insurance and Fire Insurance is related to the subject matter. In life insurance subject matter of insurance is human life. On the other side, the subject matter is Property or assets in fire insurance.

Meaning of Life insurance:

Life insurance includes the element of protection as well as an element of investment which provides financial support to the family after the death of the insured person or at the time of old age. Sometimes people take a life insurance policy to get financial independence during their old age. In both, the cases life insurance policy is very helpful.

In this, insured pay a fixed amount in the form of premium and get the compensation at the time of maturity or death whichever comes earlier. The time period for life insurance is generally 15- 20 years.

Elements:

1.The contract between the insured and the insurer on the basis of the utmost good faith.

2.The principle of indemnity is not applicable to life insurance because we cannot estimate the loss due to the death of a person.

3. Insurable interest must be present at the time of taking the life insurance policy.

Meaning of Fire insurance:

A fire insurance policy provides safeguarding against the loss by fire, explosion etc. Fire insurance covers riot, foreign enemy, civil strife. It has an element of protection of the property.

Elements:

1. Insured must disclose all the material facts related to the property for which the insurance is taken.

2. The compensation is paid only if the loss occurs due to the subject matter mentioned by the insured.

For example, property damage due to fire and the insured taken the policy related to fire then the compensation will be paid. If there will be another reason for damage occur then no compensation will be paid by the insurance company.

3. The principle of Indemnity (compensation) is applicable to fire insurance. In this, insured will get only loss amount or policy amount whichever is less.

The Chart of difference between Life insurance and Fire Insurance:

Points of differences

Life Insurance Fire Insurance
Meaning

Life insurance provides financial support to the family after the death of the insured person or at the time of old age.

A fire insurance policy provides safety against the loss by fire, explosion etc.
Contract The contract between the insured and the insurer on the basis of the utmost good faith.

Fire insurance is a contract of indemnity.

Insurable interest Insurable interest must be present at the time of taking the life insurance policy. Insurable interest must be present at the time of taking the insurance policy as well as at the time of loss or damage.
Premium In a life insurance policy, the premium is fixed cannot be changed. In the case of Fire insurance, the premium may be altered at the time of renewal of the policy.
Medical Examination Medical Examination is a must for taking the life insurance policy.

No medical examination is needed in the case of fire insurance.

Principle of indemnity The principle of indemnity is not applicable to life insurance because we cannot estimate the loss due to the death of a person. General insurance includes the principle of indemnity.
Loss  Loss is cannot be measured in life insurance

In fire insurance loss of property or asset can be measured.

Risk and Uncertainty In human life, there is an element of certainty as death or maturity of the period. So compensation is a must.

In fire insurance, there is an element of uncertainty regarding the loss of property. So there may not be any compensation to claim.

Time period The time period for life insurance is generally 15-20 years.

Period of one insurance is basically of one year.

Conclusion:

Thus, Life insurance includes the element of protection as well as an element of investment which provides financial support to the family after the death of the insured person or at the time of old age. On the other side, Fire insurance is non-life insurance. The fire insurance policy provides protection to property or assets against the loss by fire, explosion etc.

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References: –

https://vkpublications.com/

Also, Check our Tutorial on the following subjects: 

    1. https://tutorstips.com/financial-accounting/
    2. https://tutorstips.com/advanced-financial-accounting-tutorial

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