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Fire Insurance

Fire-related accidents are in the headlines ever so often. In a recent incident, a fire led to the death of six people and severely damaged the building of Excel Greentech, Noida.

Owning a business, one is always susceptible to risks. A fire eruption doesn’t only cause massive financial damage, but it is also really daunting to deal with the aftermath. Here’s why having Fire Insurance is a wise decision.

icon What is Fire Insurance Policy?

Insurance that offers protection of your property against fire-related damages is called ‘Fire Insurance’. However, this insurance is completely different from property insurance where the inclusion list includes the expenses incurred during reconstruction, repair or replacement of not only the insured property, but also nearby affected structures if any. Other coverages include damage to the personal property other than the insured and expenses of those who are affected due to the property damage.

icon Scope of Fire Insurance Policy

  • Fire insurance offers complete protection against damage, due to fire explosion, caused to movable or immovable property.
  • Fire insurance includes damages to the properties including an office building, furniture, plan, stock, machinery etc.
  • Other than fire perils, this policy also includes damages due to natural disaster, landslide, explosion, bursting of water tank etc.

Scope of Fire Insurance: Case

After serving seven years in the corporate sector, Malini started her own fashion house, with a manpower of 25. Soon after her business picking up its pace, a sudden incident left her shell-shocked. A fire erupted at her neighbourhood shop and half of the property was damaged, incurring huge financial damages. The shop owner hadn’t insured his property, hence had to bear the entire loss by himself.

Malini, taking a lesson from this event, decided to purchase fire insurance to protect her fashion house from any unforeseen events like this. Initially, finance was a constraint for her and she had to purchase old machinery and furniture. Being skeptical about whether her fire insurance covers these expenses or not, she contacted the insurer. She breathed a sigh of relief when the insurer confirmed that the scope of fire insurance covers old machinery and furniture as well.

iconTypes of Fire Insurance Policy

  • Specific policy: In this policy, a specified sum insured is decided for a certain property and in the event of any loss, the actual loss doesn’t exceed the chosen insured amount.
  • Comprehensive policy: This policy offers coverage, not only, against fire-related accidents but, also covers you against other risks including theft, lightning, burglary, civil commotion, damage or loss due to pests etc.
  • Valued policy: At the time the policy initiates, the value of the property is decided. Instead of the current market value, the indemnity of the policy is decided based on the value of the property. So, the value agreed during the time of the inception of the policy is the deciding factor of policy indemnity here.
  • Floating policy: This is beneficial if you deal with fluctuating stocks in different areas. This policy offers coverage for one or more goods at the same time under one sum assured and one premium.
  • Valuable Policy: Under this policy, the claim amount is determined based on the present market price of the damaged property.

icon Characteristics of Fire Insurance Policy One Shouldn’t Ignore

  • Contract of Good Faith - The policy is based on good faith between the insurer and the insured. At the time of policy initiation, both the parties must reveal all the material facts.
  • Contract of Indemnity - It is an indemnity policy where the insurer is only liable to cover the actual loss that occurred. Even in case of a fire, if there is no loss, no insurance liability is offered.
  • One-year Policy - The tenure of this policy is one year and can be renewed as per the defined terms and conditions.
  • Insurable Interest - This policy is valid only if the insured has an insurable interest in the insured property. Such interest is required while a loss occurs. With this, the insured is benefitted by the survival of the insured property and faces a loss in case of its destruction.
  • Personal Insurance Contract - This policy requires complete transparency. The insurer must know about the behaviour of the insured. Also, the policyholder, only, can transfer the policy with the consent of the insurer and the insurer is authorised to terminate the policy in case their possession of goods is transferred to a third-party.
  • Personal right - The person whose name is mentioned in the policy document is entitled to receive the insured amount in case of any loss or unforeseen event that causes damage.
  • Direct loss - One can avail this only if the fire is the root cause of the loss or damage.
  • Description of property - This insurance needs a proper description of the property. The location should be mentioned in the policy document. The reason is that the insurer only settles the claim when the incident happens at the insured place. In case you make any change, the insurer should be informed immediately to avoid future consequences.

icon Perils Covered under Fire Insurance Policy in India

As the policy covers a wide range of perils, it is termed as Standard Fire and Special Perils Policy as well. The inclusion list covers 

S.No.

Fire Insurance: Inclusion

1

Fire: The policy offers coverage for any damage caused owing to the fire. However, damage caused by natural heating, own fermentation or spontaneous burning are excluded.

2

Lightning: Damages caused by lightning is covered. If lightning cause fire, or other damages like cracks in the building or roof area, it will be covered by fire insurance.

3

Explosion: Fire damage caused by an explosion is covered by this policy.

4

Aircraft Damage: Fire and any other damage caused by aircraft or other airborne devices, damage due to articles dropped by an aircraft is covered by fire insurance policy.

5

Terrorist Activity, Riot Strike:  If the insured property is damaged due to a strike, riot or any terrorist activity, the loss is covered by fire insurance.

6

Natural Disasters: Apart from the above, this policy also includes damages owing to natural disasters including storm, cyclone, typhoon, tornado, flood. The hazardous situation and consequences of a natural disaster are covered by fire insurance.

7

Landslide/Rockslide: Your insurer will offer protection under fire insurance for the destruction caused to your property to a notable or even a small part of the site where the property exists by rockslide/landslide.

8

Bursting of water/overflowing of Water Tank: If your property is damaged due to the bursting of water or overflowing of the water tank, the policy covers the damage.

9

Bush Fire: At the time you set fire to overgrown plants and bushes, the possibility is where you end up damaging the property. Fret not! The fire insurance policy that you own covers you for this as well. However, the policy wouldn’t cover the destruction due to the forest fire.

icon Exclusions of Fire Insurance Policy

S.No

Fire Insurance: Exclusions

1

No damage due to nuclear perils, nuclear waste or radioactivity are covered

2

Loss or damage to any electrical machines, excessive pressure, short circuit, leakage of electricity, arcing, apparatus etc. are not included

3

Loss or damage due to theft or expense incurred directly or indirectly caused by any kind of terrorist activity are not covered by the policy.

4

Damage due to war, invasion, civil war, commotion, mutiny warlike situations are always excluded.

5

Damage or loss to the stock due to change in temperature; loss or damage directly or indirectly by some of the natural disasters like earthquake, volcano etc. are in the exclusion list as well.

6

Loss of earning, loss of delay or market loss, consequential loss are not covered by fire insurance.

iconWho Are Eligible to Take Fire Insurance Policy?

  • This insurance is meant for any person/organisation/institution/firm who may suffer or want to protect his/her business from an unanticipated loss in the event of a fire.
  • Anyone who owns a building, furniture, household articles etc.
  • Retailers or shopkeepers, godown keepers.
  • Banks, financial, education, research institutes, trustee, charitable institute.
  • Service providers including hotel owners, hospitals, lodging, clinics etc.
  • Manufacturing and industrial firms, transporters.

iconAdd-on Coverage

On payment of an additional premium, the insured can be entitled to below add-on coverage:

  • Earthquake
  • Wreckage removal
  • Forest fire
  • Loss of rent
  • Startup cost
  • Alternate accommodation
  • Spontaneous burning
  • Damage to stock due to change of temperature
  • Leakage and contamination cover
  • Architect, engineers, Surveyors consultation fee
  • Cover for molten metal spillage
  • Impact loss owing to insured’s own road/rail transit

iconHow to select the sum insured for Fire Insurance?

Sum insured is the most important aspect of an insurance policy. One has to be very careful at the time of choosing a sum insured. Fire insurance is no exception!

Sum insured for fire insurance is being decided by keeping a few things in mind such as:

  • Stock
  • Building
  • Valuables, precious materials or antiques
  • Plan and machinery, furniture or other important personal assets

iconTips to File Fire Insurance Claim

  • God forbid, you need to file a claim against any unforeseen event or fire accident, inform the insurer right away.
  • You will be required to present a detailed account of all damaged properties and estimated cost.
  • If the surveyor asks for any additional information, cooperate with him.
  • Help the surveyor in every way possible; take a tour of the damaged premises. Yes, it is quite annoying to entertain a bombardment of questions, but it anyway will help you during the claim process and quick settlement of the same.

iconDocuments Needed to File Fire Insurance

Below are the common documents for all claims related to fire insurance:

  • An authorised copy of the policy along with schedule and clauses
  • Duly filled claim form
  • Newspaper proof If the incident is published in the media channels
  • Previous claim record, if any
  • Photographs
  • FIR copy
  • Fire brigade report
  • Forensic report wherever is needed
  • Final investigation report

iconIn a Nutshell!

Regardless of the precautions or the use of latest technology, your business is vulnerable to risks! Don’t ignore the possibilities because, after all, it’s always better to be safe than sorry.

What are you waiting for? Buy fire insurance today!

iconHow Can We Help You?

Most businesses face innumerable risks but not every business manages those risks carefully. PolicyBazaar can help you find the right fire & special perils insurance cover to make sure your business stays protected from all perils. Submit basic details pertaining to your business, coverage required, etc. to compare and find the most suitable plan.

Q:

Why do I need to insure my building?

Ans:

Your building may get damaged due to fire or other perils and the losses will not be covered by a general insurance policy. For that, you’ll need a fire insurance that will cover the damages sustained by the building. Similarly, natural calamities also may wreak devastating losses, which can burn a hole in your pocket. Hence, to safeguard your property, you need fire insurance.
Q:

Can I cancel my policy in the middle of the policy tenure? Will the amount be refunded?

Ans:

Yes, the insurance company will give you a pro-rated refund of premium. If there is any retention of premium or balance for a short period, it will be refunded.
Q:

Can I cancel my policy in the middle of the policy tenure? Will the amount be refunded?

Ans:

Yes, the insurance company will give you a pro-rated refund of premium. If there is any retention of premium or balance for a short period, it will be refunded.
Q:

How to handle a loss in case of a fire?

Ans:

Despite all the precautions, you can’t predict a calamity. Hence, you need to be calm in case any such situation arises. In case of a fire, inform the local fire brigade who will help you to put out the fire. If there is any loss of another person’s property due to the fire or in an effort to douse it, the insurer shall compensate for the same.

Inform the insurer, cooperate with the supervisor at the time of loss assessment. You can also take photos of the loss if the surveyor takes a lot of time to arrive and shift all the unaffected assets to a safe place. Fill the claim form and submit it along with the documents supporting your claim. After the repair or replacement of damages, submit all the bills to the insurer.
Q:

Am I eligible to claim a higher amount if opt for a higher value?

Ans:

No. The correct claim amount is decided based on the current market value of your property and the basic Sum Insured. The compensation that is to be offered, in case of a loss, will be decided on whether the property is sufficiently insured or not. If you choose an excessive amount, it will mean excessive premium, while in case the amount is adequate, you’ll get an amount is equal to the market value of the property. In both the cases, the offered claim amount will be the same.
Q:

Does fire insurance also offer coverage for jewellery, ornaments and artworks?

Ans:

Usually, general fire insurance doesn’t cover these items, unless discussed with the insurer while buying the policy. However, on special request and subject to valuation, these items can be covered under a policy.
Q:

Does burglary insurance cover my household goods when I am away?

Ans:

A burglary insurance policy covers you against the risk of theft. However, the policy will cease if the house remains unoccupied beyond a defined period unless the insurance company has been informed beforehand. In such cases, you will be covered only if the insurer agrees to extend the cover even if the house is empty. This is why it is important to clear everything at the time of buying the plan.
Q:

What property insurance should I purchase if I own an SME?

Ans:

There are various insurance plans offering coverage against risks such as fire, earthquakes, floods that cause damage to the building, unexpected breakdown of any machinery, damage to electronic equipment, workmen compensation, fidelity guarantee, cargo risks cover etc. You can select the Sum Insured for every category based on the insurance needs of the enterprise. A comprehensive insurance package also includes employer’s benefits schemes like group personal accident or group health insurance etc. which offers a complete financial safety.
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