Burning Question: How do individuals and businesses deal with the trauma of loss after a fire outbreak?

Let’s face it, fires are scary.

They’re often uncontrollable and are an incredible threat to humans and our environment. Fires can be classified as natural disasters but more often than not, human activities are catalysts to fire outbreaks resulting in huge losses of lives and properties.

In their 2023 mid-year report, the Lagos State Fire Service recorded 1,642 fire incidents and N14.62b in loss of properties. How do individuals and businesses deal with the trauma and financial loss after surviving fire outbreaks? That is where insurance comes in.

Insurance is important for various reasons, its significance lies in providing financial protection and security to individuals, businesses, and communities. It is an investment worth having if you have anything of value worth protecting. Insurance coverage has evolved as it transcends beyond the traditional policies we know, it also covers certain unforeseen circumstances such as burglary, fire, travel, and special perils to name a few.

Fire insurance and special perils insurance are types of property insurance that provide coverage against specific risks and perils. Let's explore!

I.?????????????? Fire Insurance:

Coverage: Fire insurance provides coverage for damage or loss caused by fire. It typically includes damage to the insured property, its contents, and may also cover additional living expenses if the property becomes uninhabitable due to fire.

Perils Covered: The primary peril covered is fire. However, policies may also include coverage for related perils such as smoke damage, lightning, and sometimes explosions.

Exclusions: Common exclusions from fire insurance may include damage caused by war, nuclear events, intentional acts, or certain natural disasters not explicitly mentioned in the policy.

II.????????????? Special Perils Insurance (All-Risk Insurance):

Coverage: Special perils insurance, often referred to as all-risk insurance, provides coverage against a broader range of perils compared to standard fire insurance. It covers accidental and sudden damage to property, unless specifically excluded in the policy.

Perils Covered: In addition to fire, special perils insurance typically covers a wide array of risks, including natural disasters (earthquakes, floods), vandalism, theft, explosions, and other unforeseen events.

Exclusions: Specific exclusions are listed in the policy, and coverage is provided for all risks not explicitly excluded. Common exclusions might include wear and tear, gradual deterioration, and intentional acts.

III.??????????? Combined Fire and Special Perils Insurance: Some insurance policies may combine both fire insurance and special perils insurance, providing coverage against the perils mentioned in both types of policies. This offers a comprehensive level of protection for property owners.

While fire insurance focuses specifically on damages caused by fire and related perils, special perils insurance is a broader form of coverage encompassing a wide range of risks, excluding only those mentioned as exclusions in the policy. The choice between the two depends on the specific needs and risk profile of the insured property. In some cases, property owners may opt for a combined policy that offers protection against both fire and a broader set of perils. It's crucial to carefully review policy terms, conditions, and exclusions to understand the extent of coverage provided.

Generally, insurance is a financial safety net for protecting value. It is crucial for not just individuals but also businesses to invest in as it gives them the support needed to recover from the impact of rebuilding or replacing property, inventory, and assets. In addition, it allows for continuity as well as peace of mind.

Want to explore Fire Insurance and other coverages with FIN? Contact us for free advisory services on risk management

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