Whether your business is in an office building, home or another location, fire insurance is a type of property insurance that covers losses or damages caused by fire. It is possible to cover the repair, replacement, or reconstruction costs of property as specified in the policy by purchasing this insurance policy.
What is the importance of Fire Insurance?
Listed below are some of the reasons why you should purchase fire insurance and why it is a wise investment.
1. Loss or damage caused by any movable or immovable object that explodes in fire.
2. Fire insurance covers things like furniture, office buildings, machinery, stock, and other property damage caused by a fire.
3. A burglary insurance policy also covers damages caused by natural calamities, explosions, bursting of water tanks, etc., in addition to fire-related perils.
In India, there are different types of fire insurance.
1. Standard Fire & Special Perils contract - It provides coverage for the loss or damage caused to a building, equipment, stock, or other assets for a sum insured exceeding Rs 50 crores.
Standard Fire & Special Perils insurance (SFSP) includes five types of policies:
· A specific policy – It specifies a specific sum insured for a particular property, and the actual loss does not exceed the specified sum insured.
· Policy Coverage: This policy provides extensive coverage against not only fire related perils, but also other perils, such as robbery, burglary, and civil rampage.
· Valued policy – It determines the value of a particular property at the time of intimation. Instead of determining the market value, the policy's indemnity is determined by determining the value of the property at the time of purchase. Therefore, the agreed value at the time of purchase determines policy indemnity.
· Floating policy – It provides coverage for one or more goods at the same time under a single premium.
· Valuable policy: The claim amount is determined based on the current market value of the damaged property.
2. Bharat Sookshma Udyam Suraksha: It provides coverage for losses or damage to buildings, property, plant and machinery, stocks, and other assets up to Rs. 5 crores.
3. Bharat Laghu Udyam Suraksha policy: It covers damage or destruction of buildings, machinery, stocks, and other assets for a sum insured between Rs 5 crores and Rs 50 crores.
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Fire insurance characteristics
There are certain characteristics associated with fire insurance policies that make them unique from others. The following characteristics should not be overlooked:
Policy for a year: A term fire insurance policy normally lasts for a year, but it can be renewed depending on its terms and conditions.
Insurable interest: When the insured owns an insurable interest in the insured property, the policy is valid. In the event of a loss, such interest may be required. In an insured's favor, this ensures that the insured property survives, but in the event of a loss, the insured may have to suffer a loss as well.
Direct Loss: An individual may avail of this service if the loss or damage was caused by fire.
Personal right: A person whose name appears on the policy document will receive the insured amount in case of any loss/damage under any unfortunate circumstances.
Transparency: The policy requires complete transparency. The insured must understand the insured's behavior. Also, the insured can only transfer the policy with the consent of the insurer only, and the insurer can terminate the policy if their possession of goods is transferred to a third party.
Property Description: When purchasing a fire insurance policy, you should provide a detailed account of the possessions. In the event an unfortunate event occurs at the insured place, the claims will be settled according to the location outlined in the policy document. It is important to inform the insurer if there are any changes to avoid further repercussions.
Inclusions in Fire Insurance Plans -
is coverage for damage caused by fire, but not damage caused by natural
heating, fermentation, or unconstrained burning.
insurance company will cover any damage/loss caused by lighting, for example,
cracks in the roof or building.
this policy, damage caused by a fire explosion is covered.
policy will cover damage caused by an aircraft, for instance, articles
dropped by an aircraft, airborne devices, etc.
insurance covers any damage caused by a strike, riot, or any fear-mongering
policy covers all damages caused by storms, typhoons, and other natural
will cause destruction to your property.
of the Water Tank
the event of a water tank burst or overflow, the insurance will cover the
will cover the damage caused by setting fire to overgrown plants or shrubs.
However, the policy will not cover the destruction caused by forest fires.
Fire Insurance Exclusions in India:
The following events are not covered by fire insurance:
1. An act that is deliberate, wilful, or intentional
2. Changes in temperature can damage or lose stocks in cold storage
3. Invasion, war, and military operations of a similar nature
4. Infection or contamination by pollution
5. Property that has gone missing or has been misplaced
6. Losses or damages resulting from consequential or indirect causes
7. The cost of preparing any claim, including fees and expenses
8. Unoccupied premises or buildings for more than 30 days are not insured.
9. A precious stone, bullion, or artwork that has not been set, unless otherwise stated
10.Electrical machines, short circuits, apparatus, leakage of electricity, etc. This exclusion applies to specific machines.
Criteria for Buying Fire Insurance
Following are the criteria for buying fire insurance
· People, organizations, institutions, and firms who need to protect their businesses against unforeseen misfortunes in case of a fire.
· Those who own buildings, furniture, household items, etc.
· Shopkeepers, shopkeepers, godown keepers.
· The financial sector, education, research institutes, etc.
· A service supplier can include a hotel owner, a medical clinic owner, a lodging owner, a clinic owner, etc.
· Industrial and manufacturing companies, transport companies.
Fire insurance add-on coverage
By paying an additional premium, the insured can receive the following additional coverage:
- An earthquake
- Wreckage removal
- Forest fire
- Loss of rental income
- Cost of starting a business
- Alternate accommodation
- Burning unrestrained
- Stock damage caused by temperature changes
- Leakage and contamination cover
- Fees for consultations with architects, engineers, and surveyors
- Cover for molten metal spillage
- Loss resulting from insured's own transit by road or rail
Fire Insurance: Selecting the Sum Insured
A sum insured is one of the most important aspects of a fire insurance policy. When choosing a sum insured, you should be very careful. Consider the following factors when determining the amount insured for fire insurance:
- Objects of value, precious materials, or antiques
- Planning and securing important assets like machinery, furniture, and other items.
Tips to File Fire Insurance Claim
The following steps will help you to file a claim for your fire insurance policy if you follow the right procedure.
· You must inform the insurer immediately if you experience any unfortunate mishap that needs a claim to be filed.
· Provide an assessment of the damage to properties as well as an estimate of the cost to restore them.
· If you want to assist the surveyors or provide them with additional information, you must cooperate with them in every way possible.
· It is better to assist the surveyor by touring the damaged premises. This will enable a prompt settlement of the claim.
· A list of documents required to file a fire insurance claim
· A copy of the policy with the schedules and clauses.
· A completed claim form that has been duly filled out.
· The incident must be substantiated with a newspaper proof in the event it is published.
· Previous claims records, if any.
· The fire department's report.
· Wherever necessary, prepare forensic reports.
· An official copy of the investigation report.
Frequently Asked Questions
1. How does impact damage occur?
A collision or impact damage occurs when an external object damages your insured property, like a car, bike, tree, etc.
2. Can you explain what reinstatement value is?
The reinstatement value, also known as the new replacement value, is the point at which the insured regains the position he had before the incident.
3. Does fire insurance cover the insured for a long period of time?
Insureds are covered for 12 months under the policy.
4. If the insured cancels the policy and pays the premium back, can the premium be refunded?
This policy can be canceled at any time with a pro-rated refund of premiums.
5. What can I do to increase the coverage under this policy?
It is possible to increase coverage by purchasing insurance add-ons.
6. When purchasing the policy, can partial selections of assets be made?
It is not possible to select parts of the assets. The entire value of plant and machinery, FFF, and stock is covered by the policy based on the risk assumptions.
7. What is the time frame for getting theft coverage?
When theft occurs, the insurer will provide coverage within 7 days of the event.
8. What are the options for increasing the inbuilt sum insured limit?
The inbuilt covers do not currently offer the option to increase the sum insured limit, according to IRDAI guidelines.
9. Does the plan include a provision for excluding inbuilt perils so that the price can be reduced?
There is no provision in the policy to exclude inbuilt perils.
10. Can this policy be purchased by any commercial enterprise?
Risks associated with hotels, offices, shops, manufacturing and industrial plants, utilities kept outside the compound, storage risks, and owners of tanks outside the compound.
11. What is the premium for this policy and how is it calculated?
Insurance premiums are based on the following factors: Insured sum, insured properties, plant & machinery, buildings, stocks, etc.
12. When does the insured have the option of changing the policy?
The coverage part of your policy can be changed. Adding or removing any add-on will result in an increase or decrease in the premium amount. This only takes effect once the insurer accepts it and you have paid the extra amount.
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