Fire insurance contracts have the following fundamental principles:

1. It is a contract of indemnity. Its object is to place the insured as far as possible in the same financial position after a loss as that occupied immediately before the loss. The amount which can be recovered under the policy cannot exceed the sum for which the subject-matter has been insured.

2. A fire insurance contract is a contract is a contract uberrimae fidei. The proposer is under an obligation to disclose all material facts otherwise the policy is voidable at the instance of the insurer.

3. A contract of fire insurance like all other contracts of insurance requires an insurable interest in the subjects of matter of the insurance to support it. In the absence of such an interest the contract becomes a wagering one. Insurable interest is required to be present throughout the currency of the policy. In other words it must be present both at the time when the contract is made and at the date of the loss. The following have been held to have an insurable interest


i) Owner

ii) Mortgagee

iii) Trustee

iv) A person under an agreement of purchase


v) Warehouse man

vi) A common carrier

vii) A pawn-broker

viii) A commission agent having interest in the agency, and


ix) Insurer himself.

4. Loss resulting from fire or some other cause which is the proximate cause is the risk covered under a fire insurance contract. But where the fire is caused by the insured himself or with his connivance, or by the operation of a peril specifically excluded under the policy like earthquake, the loss will not be covered.

5. The usual practice in fire insurance is to insure for a year and in the absence of anything to the contrary it may be taken as an implied term in the contract.