Difference between Fire Insurance and Life Insurance

Difference between Fire Insurance and Life Insurance

While accidents are occurrences that cannot be avoided, taking prior precautions to help in dealing with them when it comes is of utmost importance. Precaution helps you deal with life after the accident has occurred. Insurance covers are important and help people get back to their usual lives fast after an accident has occurred.

Fire insurance and life insurance both play a major role in the protection of one’s life as well as their property.

Fire Insurance Vs. Life Insurance

Fire insurance is the type of insurance that helps to protect or cover the property of the policyholder, while life insurance is used to cover the policyholder. This is the main difference.

Comparison between Fire Insurance and Life Insurance

  • Fire insurance is an agreement that the insurance will take responsibility for any property belonging to the policyholder, in case of a fire accident. Life insurance on the other hand is an agreement between the insurance and policyholder to cover the policyholder in case of death or policy maturity by paying a lump sum amount.
  • Fire insurance covers can be taken by anyone in business for the protection of their properties while life insurance covers are for policyholders and members of their families.
  • A fire insurance cover is active for one year or less while a life insurance cover is active until the passing on of the policyholder. It is a lifetime cover.
  • Compensation in a fire insurance cover is only when the cover is still active while compensation is after death or upon the maturity of the cover, in a life insurance cover.
  • You can only take one fire insurance cover but double fire insurance is available. There is however no limit to how many life insurance covers you can take.

What is Fire Insurance?

The compensation one receives when a fire occurs and property is destroyed is called fire insurance. It is beneficial to the cover holder as it saves on costs of repair, rebuilding, and replacement as the insurance helps to compensate for all that. This is only possible if the fire insurance cover is active.

The fire insurance covers damages that are a result of a fire. Other damages caused by natural disasters are not included in this policy.

While home insurance may cover damages for a certain limit, it is still important to have a separate fire insurance cover. Compensation by fire insurance depends on the cover’s value and not the extent of the damage.

Damages caused by sources such as electricity, faulty wirings, and gas explosions can be included in the fire insurance for compensation. In order to get fully compensated, the policyholder needs to clearly document all the properties they want to be covered.

The fire insurance can offer extra compensation for the damage that comes from smoke as well as water damages that are as a result of the fire breakout whose validity is one year.

If your fire insurance policy is nearing its expiration date, you can get a renewal based on the initial terms and conditions of the original policy. There are two things to put into consideration before raising a fire insurance claim.

  • The fire outbreak should have created real property loss.
  • The fire should have come about by accident.

What is Life Insurance?

Life insurance is an agreement made between an individual and the insurance company. The individual is whom we call the policyholder. Since there are premium payments made by the client to keep the life insurance active, the insurance company is obligated to pay a lump sum amount upon the death of the policyholder or once the cover has come to maturity.

All death benefits that come with a life insurance cover are tax-free. A few of these life insurance covers include term life insurance, universal life insurance, and whole life insurance.

  • Term life insurance covers offer protection for a specified period of time, for example, ten to twenty years. It is less expensive to take a term life insurance cover. Compensation amounts are only paid once, as a lump sum.
  • Universal life insurance offers protection to the policyholder throughout their life. It is more flexible and the policyholder can choose to reduce or to increase their premium payments. Either way, the policyholder will benefit upon the maturity of the policy, or his beneficiaries will benefit should this policyholder pass on. It is a cover that ascertains you of lifetime protection.
  • Whole life insurance is a life insurance cover intended to give protection to the policyholder, all their life. It is mainly meant to protect the wealth of the holder that he or she intends to transfer to a member of their family.

Difference Between Fire Insurance and Life Insurance

  • Fire insurance protects the policyholder’s property in case of damage caused by the accidental fire while life insurance protects the policyholder after death or any damage that comes to them.
  • Fire insurance is active for a short period while life insurance is active for a lifetime, until the death of the policyholder or maturity of the policy.
  • You can only take one fire insurance policy but there is no limit to how many life insurance policies you can take.
  • Fire insurance protects or covers properties while life insurance protects the individual.
  • You cannot surrender a fire insurance cover. You can however surrender the life insurance once certain conditions are fulfilled.


In conclusion, either kind of insurance cover is beneficial to an individual. You are either assured that you will get compensation for your property in case of damage by accidental fires and other disasters, or you are ascertained that upon your death, a lump sum will be paid to your beneficiaries.

Accidents cannot be avoided. They are incidents that are not planned for. The damage that is caused however can be avoided by getting the compensation that is offered by these insurance covers. Whatever cover you choose to take, you are assured maximum protection.