Accidents are unpredictable but taking precautions to face it will be a wise decision for resuming life afterward.
Insurance policies can help people to get back to life fast after an accident through the coverage of losses ensured by insurance.
Fire insurance and life insurance are two major types of insurance one may need to take to protect his/her life and properties.
Fire Insurance vs Life Insurance
The difference between Fire Insurance and Life Insurance is that fire insurance covers the losses caused by the properties of the policyholder whereas life insurance covers the losses that happened to the person of the policyholder.
Comparison Table Between Fire Insurance and Life Insurance (in Tabular Form)
|Parameter of Comparison||Fire Insurance||Life Insurance|
|Definition||An agreement which gave assurance to the policyholder that the insurance company will provide coverage in the occurrence of fire-related accidents.||An agreement upon which an insurance company take up the obligation to pay a lump sum either on the death of the client or on maturity of the policy.|
|Insurance holder||Fire insurance can be taken by exporting and importing business owners, shipping companies, etc.||Life insurance can be taken by a person for his own life or members of his family.|
|Duration||Fire insurance is for short term duration such as one year or less.||Life Insurance policy can be taken for any duration of time or until the death of the policyholder.|
|compensation||Compensation is provided only if there is a fire accident during the period of Insurance.||Life insurance is given either on the maturity of the policy or on the death of the person or whichever comes first.|
|Policies||Only a single policy can be taken but the option for double insurance is available.||No limitation for the number of policies.|
What is Fire Insurance?
The kind of property insurance that compensates the losses and destructions created by fire is called fire insurance. By acquiring fire insurance along with property insurance is beneficial for property owners to get coverage for the expenses of repairing, rebuilding, and replacement costs, over the regular insurance policy limit.
Normally a fire insurance cannot cover the losses created by nuclear risks, wars, and other similar disasters. Fire insurance is a particular kind of insurance policy that may cover the damages and harm caused by a structure by a fire accident.
Even though home insurance may cover fire damage for a certain limit, a separate fire insurance is necessary to match the cost of the total losses created by a fire accident. When a regular insurance policy’s fire coverage is less extensive or no coverage, people may need separate fire insurance especially if they have valuable items that cannot be covered by regular insurance coverage alone.
The liability of an insurance company is restricted by the value of the policy and never based on the loss or damage of the property.
A typical fire insurance pays for the damage that prevents the owner to use the property further and also for the living cost because of a necessity due to the unhabitable conditions resultant of the fire. It comprises the personal property and nearby structures associated with the original property on which a person purchased the fire insurance.
It is vital for the policy owners to correctly document all the items of the property and its assets to simplify the damage assessment after the fire accident. A fire insurance policy contends extra coverage required against smoke as well as water damage created by the fire and is valid for one year.
The fire insurance policies that is nearing the expiry date can be renewed by the policy owner based on the terms of the original policy. A fire insurance policy can cover the damages created by electricity, an explosion of gas, lightning, bursting and overflowing of water pipes, and other similar natural disasters.
The limit of fire damage depends on the cause of the fire. The fire policy is reimbursing the holder of the fire insurance policy based on the cost of replacement as well as actual cash value based on damages. Two conditions should be considered while claiming a fire insurance. There should be real loss created by fire and the fire is caused by accidental means.
What is Life Insurance?
A life insurance policy is an agreement between a client and an insurance company. As a response to the premium payments made by the client, the company is obligated to pay a specific amount of money upon the death of the client to the beneficiaries of the policyholder.
The death benefits of almost all kinds of insurance policies are tax-free. The major varieties of insurance policies include term life insurance, universal life insurance, and whole life insurance.
Term life Insurance: – It gives protection for a predetermined duration say ten to twenty years. In a conventional term insurance, the premium amount is the same for the coverage period selected by the client.
After the coverage duration of the term insurance, if the policies need to be continued higher premium amount may require. Term life insurance policies are less expensive. Its reimbursements are paid at one time as a lump sum.
Universal life insurance: – It provides lifetime coverage. It is more flexible than a term insurance and a person has the freedom to lower or raise the premium payment as well as the coverage at any time.
Because of the lifetime coverage, premium payments can be made for universal life insurance. It is commonly used as part of a flexible strategy for estate planning to protect wealth to be shifted to the recipients. It is also used as an income replacement for a long duration when a person requires it beyond his/her working years.
Whole life insurance: – it is one of the permanent life insurances intended to give lifetime protection. The premium payment of whole life insurance is fixed.
It is an insurance beneficial for estate planning to protect the wealth when a client is planned to transfer it to his/her beneficiaries.
Main Differences Between Fire Insurance and Life Insurance
- The main difference between Fire Insurance and Life insurance is, fire insurance is for the protection of the properties in case of fire accidents but life insurance is to cover the loss of life or damage happened to an individual who holds the policy.
- Fire insurance is for a short duration whereas life insurance is for a lifetime or until the maturity of the policy.
- Only one Fire insurance policy can be taken by a person but there is no limitation for the number of policies in the case of life insurance.
- Fire insurance provides coverage to properties whereas life insurance provides coverage to the life of an individual.
- No option of surrender in fire insurance but life insurance can be surrendered upon the fulfillment of certain conditions.
Insurance offers a certain level of protection to the life and assets of a person. Fire insurance is significant for businesses like exporting and importing, shipping, etc. where the possibility for fire accidents is high. Life insurance is beneficial to the individual upon the completion of the term or the beneficiaries of the policyholder upon his/her death before the end of the term.
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