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Understanding Fire Insurance Policy A fire insurance policy is designed to compensate for damages caused by accidental fires. It covers physical assets like buildings, machinery, inventory, and furniture, ensuring that businesses can recover from fire-related financial losses. Types of Fire Insurance Valued Policy – The compensation amount is pre-decided based on asset valuation. Specific Policy – Covers losses up to a fixed sum insured, regardless of actual damages. Floating Policy – Ideal for businesses with assets in multiple locations; offers coverage under a single policy. Comprehensive Policy – Provides coverage for fire damage along with additional risks like natural disasters. Replacement Policy – Ensures reimbursement based on the cost of replacing damaged goods rather than their original value.