Guide for Fire Insurance - IC 57

Key for Associateship Examination

Guide for
Fire Insurance
(Paper No. IC-57)

Authored by:
Dr. Rakesh Agarwal
M.Com(BIM),L.L.B, PGJMC, M.B.A, F.C.A.,DISA,F.I.I.I, Ph.D
Editor
The Insurance Times

Published By :
The Insurance Times
The First monthly Journal on Insurance in India in service
since 1981

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G
© Dr Rakesh Agarwal, Kolkata
1st Edition October 2012
2nd Edition February 2013
3rd Edition December 2015
4th Reprint Edition August 2016
5th Edition February 2017
6th Edition September 2017
ISBN : 978-93-81489-04-8
Cost : ` 1500 - Self Learning Kit
MCQ Guide, Ebook, and Online Mock Test
All Rights reserved by the publishers. No part of this
publication can be published or reproduced in any form, by
shuffling of questions, remodelling of questions or by any
means i.e., electronic, mechanical, including photocopying
without the prior permission of the publishers.
Every effort has been made to avoid errors or omissions in
this publication. This is a guide book prepared on the basis
of syllabus of Insurance Institute of India for Associate Exam
to assist candidates to pass in exam successfully.
The publishers will not be responsible for loss or damage due
to errors in this publication. Any error, mistake may be brought
to our notice, which shall be taken care in the next edition.
All disputes subject to Kolkata Jurisdiction.

WARNING: Do not Xerox the book. The Book may tear

away and we shall not be responsible for it.

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 Guide for Fire Insurance - IC 57

Preface

We are happy to launch the 6th Edition of Guide to Fire

Insurance (IC-57).

Recently III has revised the syllabus and now all the
papers will be in Multiple Choice format.

W e have covered thoroughly the whole syllabus

prescribed by I.I.I and the questions and answers are
given based on each chapter. The book has been
prepared carefully to cover almost all types of questions
that can be asked in exam.

We hope the candidates will find this book very useful

in preparing for the examination. Please do go through
the tips given in this book for clearing the exam
successfully.

We are thankful to Shyam Agarwal, Associate Editor, The

Insurance Times and Dr Abhijeet Chattoraj, Resident
Editor, The Insurance Times for valuable inputs in the
book and for his untiring effort in preparation of the
guide.

Though we have tried to make this publication error

free, if you come across any error please email/fax us
so that we can correct the same in next edition.

We wish you best of luck for the examination.

- Editor in Chief,
R. G. Agarwala
The Insurance Times

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Tips for passing the exam successfully

1. Plan out your study programme in advance so

that you do not leave any important topic.

2. We have covered questions in various pattern

and options so that the concept of subject is
clear to the candidates. Since the questions may
be twisted in the exam it is not advisable to
mug up the questions.

3. Before appearing in the examination try to solve

questions in exam conditions by setting up time
and solving the questions as if appearing in exam.

4. Do not consult too many things at a time

otherwise you will confuse everything. Go step
by step.

5. When you view the question paper in the exam

do not try to read all questions instantly as it will
waste your time and if you don't know answers
of some question you will get tensed.

6. Read and read carefully before answering any

question as the question might have been
twisted.

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 Guide for Fire Insurance - IC 57

7. Before deciding the answer give stress on the

logic and you will get the correct answer.

8. Always keep some time to review the paper.

9. Once you complete reading a chapter in book,

attempt for online mock test. If you do not score
well again go to the chapter and study again
and reattempt the questions until you get good
marks.

10. In the new pattern of questions the questions

are large so before answering read questions
very carefully. A single not or negative or positive
construction may change the answer, so check
whether question is asking in affirmative or
negative.

11. When you receive the question paper first

answer the questions in which you are confident.
Say you know 40 out of 100 question then
answer them so that you are confident of
securing this mark. After this you again start
from beginning and read question twice/thrice if
you have confusion.

12. As more and more exams are being conducted

in MCQ pattern the level of difficulty is

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increasing. A new trend has started where you

may find that most answers are right. Out of
this you will have to select the best option which
best resembles the question.

13. Adopt Elimination technique. For example out of

5 option first try to figure out the option which
is absolutely wrong. So go on eliminating the
wrong options to arrive at the correct option.

14. Don't leave any question unanswered. Since

there is no negative marking attempt all the
questions. Try to arrive at the most likely
answer.

15. In many questions you will find the answer All

above. Most likely in such type of questions the
answer will be All the above. But again exercise
caution become they may intentionally give this
option to confuse you.

16. Do not leave any chapter. Focus on all chapters

equally. MCQ questions are set from a pool of
questions. At times it happens that from a
particular chapter many questions are set. You
leave any chapter at your sole risk.

17. Along with this guide study the Ebook given

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 Guide for Fire Insurance - IC 57

along with this book including the Online Mock

Test for assessing your preparation.

18. Relax, relax and relax while answering. Avoid

anxiety. If you will take strain then chances are
that you may answer incorrectly even the
questions you know.

19. Well we wish you Best of Luck for the exam

and hope you clear the paper in the coming
attempt.

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Contents

Fire Insurance Highlights 11

MCQ Questions & Answers

Chapter -1
Basic Principles and the Fire Policy 42

Chapter -2
Add on Covers and Special Policies 99

Chapter -3
Fire Hazards and Fire Prevention 151

Chapter -4
Erstwhile Tariff - Rules and Rating 200

Chapter -5
Documents 224

Chapter -6
Underwriting 250

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 Guide for Fire Insurance - IC 57

Chapter -7
Claims - Legal Aspects 319

Chapter -8
Claims Procedural Aspects 362

Chapter -9
Consequential Loss Insurance - I 411

Chapter -10
Consequential Loss Insurance II 442

Chapter -11
Specialised Policies And
Overseas Practice 478

Answers for all Chapters 518

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Fire Insurance Highlights

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Important Points to Remember

Introduction
"Fire Insurance Business" has been defined in
Section 2 of the Insurance Act, 1938 as "the
business of effecting, otherwise than incidentally to
some other class of insurance business, contract of
insurance against loss by or incidental to fire or other
occurrence customarily included among the risks
insured against in fire insurance policies."

The subject matter of fire insurance, may be any kind

of moveable and immovable property having
monetary value, e.g., building, furniture, fixtures and
fittings

Fire Insurance Contract may be defined as an

agreement between the insurers and the insured
whereby the insurers on payment of premium by
insured, undertake to make good the financial loss,
(subject to the sum insured) suffered by the insured
as a result of damage or destruction of the insured
property by fire or other specified perils, during the
policy period.

Fire Insurance contracts are governed by the general

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 Guide for Fire Insurance - IC 57

law of contract and it must have the following

features in order to make it enforceable at law:-
a) offer and acceptance
b) consideration
c) agreement between the parties
d) legal competence of the parties and
e) legality of the contract.

Basic Principles
The Fire Insurance Contract is also governed by the
following principles
a) Utmost good faith
b) Insurable interest
c) Indemnity
d) Subrogation
e) Contribution
f) Proximate cause

Utmost Good Faith

In insurance contracts, the legal doctrine of utmost
good faith applies. The insured has the duty to
disclose all material facts, relating to insurance.

In Insurance contracts duty of disclosure continues

throughout the currency of the policy.

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Chapter 1

Basic Principles and the Fire

Policy

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 Guide for Fire Insurance - IC 57

Model Questions Bank - Set I

1. Choose the correct answer which defines

Fire Insurance.
a. The business of effecting, otherwise than
incidentally to some other class of insurance
business, contract of insurance against loss by
or incidental to fire or other occurrence
customarily included among the risks insured
against in fire insurance policies.
b. The business of effecting insurance business,
contract of insurance against loss by fire or
other occurrence customarily included among
the risks insured against in fire insurance
policies.
c. The business of effecting, otherwise than
incidentally to some other class of insurance
business, contract of insurance against loss by
fire among the risks insured against in fire
insurance policies.
d. The class of insurance business, contract of
insurance against loss by or incidental to fire or
other occurrences customarily included among
the risks insured against in fire insurance
policies.
e. The business of effecting, otherwise than
incidentally to some other class of insurance

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business, incidental to fire or other occurrence

customarily included among the risks insured
against in fire insurance policies.

2. The business of effecting, otherwise than

incidentally to some other class of ______
business, contract of insurance against loss
by or incidental to fire or other occurrence
customarily included among the risks insured
against in fire insurance policies is defined
as Fire Insurance.
a. Pecuniary. b. Charitable.
c. Insurance. d. Profitable.
e. Any one of the above.

3. The subject matter of fire insurance may be

any kind of moveable and immovable
property having______ value.
a. Momentary b. Pecuniary
c. Permanent d. Aesthetic
e. Resale

4. What are the contents covered under fire

insurance?
a. Buildings, furniture
b. Fixtures and fittings, household contents
c. Plant, equipment and machinery
d. Stocks and merchandise in the premises or in
the open

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Answers - Chapter 1 19. c. According to the

principle of Insurable
Set - I Interest the insured is
1. a. The business of also expected to act
effecting, otherwise as if he is uninsured
than incidentally to at all times and
some other class of safeguard his property
insurance business, from the perils, and
contract of insurance following a loss the
against loss by or Insured is expected to
incidental to fire or salvage as much of
other occurrence the property as
customarily included possible and ensure
among the risks proper firefighting
insured against in fire operations.
insurance policies. 20. d. Both of them are
2. c. Insurance. correct.
3. b. Pecuniary 21. e. Only b and c
4. e. All of the above. 22. b. Legal
5. d. All of the above. 23. d. All of the above.
6. d. All of the above. 24. c. Both of a and b.
7. e. All of the above. 25. a. To place the Insured,
8. d. All of the above. as far as possible in
9. c. It covers damage the same financial
caused as a position just before the
consequence of fire loss.
like loss in production, 26. b. The Insured is allowed
loss in profit etc. marginal profit as a
10. e. All of the above. loyalty for paying
11. b. 1872 premium.
12. b. Indian Contract Act, 1872. 27. c. Both a and b are true.
13. e. All of the above 28. c. Physical
14. e. All of the above. 29. d. All of the above.
15. e. All of the above. 30. b. It is the value of the
16. a. Insured property as indicated
17. e. All of the above are in the insured's books
true. of accounts.
18. e. All the above 31. d. It is the value on
statements are correct. which the rate of

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 Guide for Fire Insurance - IC 57
premium to be charged 9. a. Explosion causes
is calculated. damage by rupturing,
32. e. Only a and c. shattering, cracking
33. c. Only a and b etc. of property and is
34. d. All of the above evidenced by broken
35. d. All of the above machinery, shattered
36. d. The sum insured is glass splintered timbers
usually in lakhs. and widely scattered
37. e. All of the above. debris. This is known
38. d. Only a and b are true. as concussion damage.
39. e. None of the above. 10. b. Inwards, pressure
40. a. All India Fire Tariff 11. d. Destruction or damage
41. e. All of the above. caused by pressure
42. e. The IRDA has waves.
withdrawn the ratings, 12. e. All of the above.
rules and regulations 13. a. Destruction or damage
effective from 1st caused by pressure
January 2007. waves.
43. d. All of the above 14. e. All of the above.
44. c. Eight 15. d. All of the above
45. d. All of the above 16. d. All of the above.
46. e. Only a, b and c 17. e. All of the above.
47. e. All of the above 18. e. All of the above.
48. b. Thirteen 19. e. All of the above.
49. b. Ignition or burning 20. d. All of the above
50. d. All of the above. 21. a. Heavy rain
22. b. Escape
Set - II 23. d. Only a and b
1. a. Accidental 24. c. Both a and b
2. b. As they are not 25. e. All of the above.
accidental loss but 26. d. All of the above.
inevitable loss under 27. c. Accidental
certain circumstances. 28. c. Forest fire is
3. d. All of the above. catastrophic in nature
4. d. All of the above. and can be included
5. d. All of the above. as an 'add-on' cover
6. a. Covered on payment of extra
7. d. All of the above. premium.
8. e. All of the above. 29. c. 3, 13 and 15

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