Insurance is a legal agreement between two parties. i.e. Insurance company (Insurer) and Individuals (Insured).
It is also Protection from financial loss or reimbursement. The insurance company takes this risk of providing high coverage for a small premium because very few insured people end up claiming the insurance.
Therefore, get insurance for a significant amount at a low price. Life Insurance and General Insurance are mainly two types of Insurance.
The Insured gets the compensation only when the loss is caused to them; it is also called non-life Insurance. It is classified into subcategories, and Fire Insurance and Home Insurance are part of this.
Key Takeaways
- Fire insurance exclusively covers damages caused by fire, including smoke and secondary damage from extinguishing efforts.
- Home insurance is a comprehensive policy that covers multiple perils, including fire, theft, natural disasters, and liability.
- Home insurance often includes personal property protection and temporary living expenses, whereas fire insurance does not.
Fire Insurance vs Home Insurance
The difference between Fire Insurance and Home Insurance is that fire insurance compensates for damage caused by fire, lighting, Thunder and Smoke, which happens only due to fire. At the same time, Home insurance covers damages due to natural calamities, Manmade Disasters, Fire, burglary and others.
If there is a fire accident and it damages the property, then it can be claimed using fire insurance. The repair expense and reconstruction expenses are also covered by fire insurance.
It also covers the damages caused to third-party property or livelihood due to fire. Any natural or artificial disaster to the home property can be claimed using Home Insurance.
It offers the property financial security and covers the liabilities inside the house.
Comparison Table
| Parameter of Comparison | Fire Insurance | Home Insurance |
|---|---|---|
| Compensation | Covers damages due to fire, lighting, Thunder and smoke. | Covers Damages due to natural calamities, Manmade Disasters, Fire, Burglary and threats. |
| Exclusions | Exclusions are not explicitly stated. They are only listed in the standard policy. | It includes general and special exclusion—for example, property under construction/renovation, radiation, etc. |
| Insured Object | Mainly used for the protection of private property. Such as Home, Apartment. | It is used for commercial or industrial insured objects such as office buildings, factories, hospitals, or modern market buildings. |
| Premium Rate | The premium rate offered is lower and must comply with the regulations set by the insurance agency. | Compared to Fire insurance, this is slightly higher in rate |
| Payout | Fire insurance offers payouts only to Structurally damaged when you purchase a property, like pipes, floors and walls so on. | Home insurance offers payout not only to structurally damaged but also to things added after purchase. |
What is Fire Insurance?
Fire Insurance covers damages caused by the fire. While a few home insurance policies have coverage for damages due to fire, financial experts should get fire insurance separately if there are valuable items at home.
Put, fire insurance provides money for any damage caused by fire. Any smoke or water damage due to fire is also covered by fire insurance.
While buying a fire insurance policy, giving a good account of the possession is advised. Because as per the location addresses in the policy document, the claim will be settled.
If any unfortunate events occur at the insured place, if changes are not brought to the insurer’s notice, then it’s a loss to the insurer. Fire insurance does not cover any damage or loss due to electrical machines, short circuits, leakage of electricity and to the stock due to temperature changes.
Directly or indirectly, some natural disasters like earthquakes and floods create damage that is not covered. It can be added to the policies for earthquakes, floods, etc., upon paying an extra premium.
The essential condition to be able to claim fire insurance is there must be an actual fire in the insured premises. And the fire must have been caused only due to an accident which has caused the damage that the policyholder cannot bear.
If not accidental, the damage by heat or fire won’t be considered a loss due to fire. Hence, insurance is not applicable in such instances.
The claim against any insurance policy includes details about the loss suffered, submission of bills, proof of damage, loss etc. later; the insurance company would verify the claim of the Insured and then reimburse for the loss.
What is Home Insurance?
The property insurance that covers the damages or losses due to natural or artificial disasters that have been inflicted on the property is called home insurance. Any accident in the property that belongs to the house is also covered by the home insurance.
Home insurance covers four kinds of incidents; damage to the interior part of the house, exterior damage, damage or loss of personal belongings or property-connected objects, and injury while on the property. Standard home insurance policies do not cover any disasters like earthquakes or floods.
Special coverage insurance must be taken if the property is in flood- or earthquake-prone areas. Home warranty and home insurance are not the same.
Where a home warranty is provided to home systems or appliances for repairs and replacement, home insurance covers damage due to different aspects.
Home Insurance premium includes the size of the home or property, type of coverage plan, age of home, building, factory and systems installed in, Location of home and property and sun assured. Based on these, the premium amount calculation will be made, and it differs from one agency to another insurance agency.
Home insurance is essential as it protects the home from damages, even minor ones. For example, if the roof gets damaged due to wind, storm and leakage of ceiling or walls.
Main Differences Between Fire Insurance and Home Insurance
- The main difference between Fire Insurance and Home Insurance is fire insurance covers the damage caused due to fire, lightning and explosion. Whereas Home insurance covers damages due to natural calamities, Man-made Disasters, Fire, burglary, threats and other
- Fire insurance is used for protection over private properties such as a house and apartments. At the same time, Home Insurance is generally used for commercial buildings.
- The fire insurance premium is lower and differs from agency to agency. At the same time, the Home insurance premium is slightly higher than fire insurance.
- Fire insurance offers a payout if the home is structurally damaged, like walls, floors, pipes, etc. At the same time, Home insurance deals with the payouts for the content of a house or property which are not part of the structure and is also added to the home after purchase, such as furniture, appliance even personal items.
- Fire insurance only includes coverage for loss due to fire. Whereas The home insurance policy can also help cover damages due to fire by paying extra premiums. Whereas fire insurance only includes coverage for loss due to fire.
- https://scholarship.law.cornell.edu/cgi/viewcontent.cgi?article=1335&context=clr
- https://thebhc.org/sites/default/files/beh/BEHprint/v027n1/p0091-p0101.pdf
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Chara Yadav holds MBA in Finance. Her goal is to simplify finance-related topics. She has worked in finance for about 25 years. She has held multiple finance and banking classes for business schools and communities. Read more at her bio page.
