In the delicate fabric of life, the harmony of our surroundings can be disrupted by the unexpected. When it comes to business, fire is one such disruption and the India Risk Survey Report 2021 showed fire in the 4th position on its list of most disruptive business risks. The concept of fire insurance, therefore, emerges as a steadfast guardian against this potent and unpredictable risk named fire. Yet, within the realm of fire insurance lies a spectrum of perils, each with its own potential to ignite chaos and devastation. The question arises: how many perils are encompassed within the realm of fire insurance?
In this article, we would look to unveil the myriad of threats that fall under the protective umbrella of fire insurance and would also discuss the perils that warrant the shield of fire insurance. Whether you are a policyholder or simply wish to grasp the intricacies of safeguarding against fire-related threats, this article promises to illuminate the path toward greater awareness and preparedness.
Perils in a fire insurance policy
The first step to understanding the fire policy you wish to buy is to know the common perils that may be covered by the policy. A standard fire insurance policy usually covers 12 perils as mentioned below-
- Fire & smoke damage: The most obvious peril covered by fire insurance is, of course, the fire itself. Fire can engulf properties in mere minutes, leaving behind extensive damage. In addition, the insidious effects of smoke can lead to long-term structural issues and the need for costly repairs. Generally, any damage caused due to fire is covered under this policy. However, there are a few exclusions such as the damage caused by its natural heating.
- Lightning: Damages caused due to lightning can cause fires that rapidly spread, leaving homeowners and property owners vulnerable to significant losses. Damage to the roof or the building caused by lightning is covered under the standard fire policy.
- Accidental Explosion/Implosion: Explosions, whether from gas leaks or chemical reactions, can quickly escalate into fires that cause widespread destruction. Similarly, implosions may occur when a building collapses inwards due to an internal explosion. If your insured premise is damaged due to a fire caused by either explosion or implosion, a fire insurance policy will cover damages caused by both. The policy ensures that property owners can rebuild and recover from the aftermath of these unexpected events. However, the coverage excludes losses caused to:
- Machinery /apparatus in which steam is produced
4. Aircraft damage: This coverage protects the insured property against damage caused by aircraft or aerial devices. This could include situations where an aircraft crashes into the insured building or property, causing physical damage. It may also include destruction caused by the force of the impact, debris, and any subsequent fire that may occur as a result of the collision.
5. Riots, strikes, or terrorist activity: A standard fire insurance policy coverage includes the losses or damages caused due to external, violent situations such as strikes, riots, or terrorist activities. Thus, this policy safeguards against the malicious intentions of individuals who seek to inflict harm on properties, ensuring that property owners are not left solely responsible for the damages.
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6. Natural calamities like storms, cyclones, hurricanes, and floods: The policy provides coverage for damage to the insured property resulting from the specified natural calamities, including storms, cyclones, hurricanes, and floods. This coverage extends to both the physical structure of the property and its contents. This may also cover damage from strong winds, heavy rain, flooding, and other destructive forces associated with these events.
The policy typically covers the repair, replacement, or rebuilding of the insured property's structure, including walls, roof, foundation, and other components. Additionally, the contents of the property, such as furniture, appliances, and personal belongings, may also be covered for damage or loss resulting from natural calamities. It should be emphasized, however, that a typical fire policy does not cover earthquakes or volcanic eruptions. You have the option of purchasing an additional cover for the same.
7. Impact damage: Impact damage coverage applies when the insured property sustains damage due to the impact of objects or vehicles. However, the said object or vehicle should not belong to the insured, the occupier of the premise, or an employee during his employment. This coverage could encompass situations such as a vehicle crashing into a building, a falling tree damaging a roof, or other similar incidents. It may also include destruction caused by the force of the impact, debris resulting from the collision, and any subsequent fire or secondary damage triggered by the incident.
8. Subsidence and landslide: Subsidence refers to the sinking or settling of the ground, while a landslide is the downward movement of a mass of earth or rock. The coverage includes damage to the insured property resulting from these events. The coverage typically applies to damage caused by natural occurrences, such as heavy rains, earthquakes, and other geological factors that contribute to the subsidence or landslide. This could include damage to the structure, foundation, walls, and other components of the insured property. Exclusions to this coverage include:
- Coastal erosion
- Normal cracking of the property
- Defective design or materials
9. Bursting/overflowing of water tanks, pipes, and apparatus: This coverage applies when the insured property experiences damage due to the sudden bursting or overflowing of water tanks, pipes, and other water-carrying apparatus. It is intended to address situations where a sudden and accidental release of water causes damage to the insured property.
The coverage usually encompasses instances such as the bursting of water pipes due to freezing, corrosion, excessive pressure, or other unforeseen factors. It may also include situations where water tanks or other water-carrying equipment unexpectedly overflow, leading to damage. This could also include damage to the structure, interior components, and contents of the property. However, damage resulting from lack of maintenance, wear, and tear, intentional acts, or gradual deterioration may be excluded from coverage.
10. Missile testing operations: This coverage applies when the insured property experiences damage due to missile testing operations or related activities. The coverage may apply to damage caused by debris, shockwaves, or other effects resulting from missile testing operations. This could also include damage to the structure, exterior, interior components, and contents of the property.
11. Leakage from automatic sprinkler installations: The coverage typically pertains to instances where the automatic sprinkler system, is designed to suppress fires, malfunctions, or leaks. This could lead to water damage to the insured property, including interior components and contents. The coverage focuses on direct physical damage resulting from the leakage. This could include damage to walls, floors, ceilings, electrical systems, and items within the property that are affected by the water. However, damage caused by wear and tear, lack of maintenance, or intentional acts may not be covered.
12. Bushfire: This coverage applies when the insured property experiences loss or damage due to bushfires. Bush fires, also known as wildfires or forest fires, are uncontrolled fires that spread rapidly through vegetation and can cause significant damage to properties located in or near affected areas.
Coverage typically applies to damage caused by naturally occurring bushfires that are ignited due to factors such as dry weather, high temperatures, lightning strikes, or human activities like discarded cigarettes or open flames. The coverage focuses on direct physical damage resulting from the bushfire. This could include damage to the structure of the insured property, its exterior, interior components, and contents.
As we draw the curtains on our article, we can see that it has led us to explore a diverse array of fire perils, each with the potential to disrupt and devastate. We have observed how fire insurance offers a shield against the unpredictable and ensures that the aftermath of a fire is met with resilience rather than despair. As we carry the insights garnered into our daily lives, let us embrace the spirit of preparedness. Armed with the knowledge of the perils covered by fire insurance, we hope you are now better equipped to make informed decisions that protect our homes, properties, and livelihoods.