The steps to be followed in connection with affecting fire insurance are as under:
- Selection of insurer: The selection of the insurance company is the first step. The insured is required to select a suitable company for this purpose amongst a large number of companies engaged in this business. The proposer can selected any of these companies according to his convenience, rationality, goodwill of the company, its financial soundness, premium rates, policies and service provided etc.
- Presentation of proposal in the prescribed form: After the selection of the insurance company a proposal form is obtained and furnished with the insurer or his agent. The particulars about the name, address, occupation of the proposer, value and nature of the subject matter of insurance, type of policy required, amount of sum insured etc. are to be furnished with care and utmost good-faith. All the facts about the subject matter should be clearly disclosed.
- Evidence of goodwill: The proposer is required to furnish a certificate as evidence of his good will along with the proposal. The format of this certificate is given with proposal form itself. Usually, the insurance agent certifies that he knows the proposer for a period time and his reputation is good in the society. In case the proposer is not known personally to the agent or of doubtful integrity, the proposer will be asked to furnish such n evidence from any reputed person in the society.
- Recommendations by Agent: The agent also gives his recommendations in the proposal form at the place provided for this purpose. The insurer takes the decision to accept a proposal keeping in view of the recommendations given by the agent.
- Survey of the subject matter: When a proposal for fire insurance is received in the office of the company, it makes a thorough study of the proposal and if necessary, a survey of the subject matter of insurance is conducted. Such a survey is conducted by expert surveyors, who will go into enquire about the conditions of the subject matter, surrounding situations of the subject matter, risks involved etc. The surveyors also verify the accuracy of the details furnished in the proposal.
- Report by Surveyors: After the survey, the surveyors present a report to the insurance company. This report will state the physical and moral hazards involved in the proposal. This report serves as an important base for determining premium.
- Acceptance of proposal: After determination of premium on the basis of risk involved, the proposal is accepted and an intimation is sent to the proposer asking him to pay the premium within a specified period of time. If the surveyors present an adverse report, the proposal is rejected and a regret letter is sent to proposer.
- Depositing of premium money: A lawful contract between the insured and the insurer is entered into, when the premium money is deposited by the insured. The risk commences as soon as the premium is remitted.
- Issue of Cover Note: As soon as the premium money is deposited, the insurer issues a cover note (a provisional policy) indicating there is that the insured has deposited the premium and the insurer has accepted the proposal. On issue of absolute policy the legality of the cover note ends. A cover note can also be insured pending the process of survey of the subject matter and the premium has not been determined.
- Issue of Insurance Policy: When all the requirements under the risks have been complied with, the insurer issues the policy duly stamped and containing all terms and conditions. These terms and conditions define the mutual rights and liabilities between the insurer and the insured.