Fire waste is the result of two types of hazard, viz., and ‘physical’ and ‘moral’.

Physical Hazard:

It refers to the inherent risk of fire in the property which may occur due to inflammable nature, construction, artificial lighting and heating, lack of extinguishing apparatus use of the property, etc. It may also cover other risks such as explosion, riot, strike, etc.

Moral Hazard:


The moral hazard depends upon the man as physical hazard depends on the property. The property may be set on fire by the owner or by any person with his willingness; carelessness and lack of sense of duty may also increase the fire waste.

Sometimes, when market price is going down the owner can willingly set fire on the property and gain from the payment of insurance money. Thus, where the property was destroyed with the willingness of the property owner, moral hazard exists.