What is Fire Insurance?
Fire insurance is also known as a fire and burglary insurance policy. It is like property insurance that provides coverage for loss or damage caused by fire to the property. The policy pays the insured on the basis of either actual cash value or replacement cost value.
Why is Fire Insurance Important?
Let us understand the fire insurance meaning and why is it a wise choice. Here are some of the features of fire insurance that indicate why you should purchase it.
- Protection against any loss or damage caused due to any movable or immovable object that turns into a fiery explosion.
- A fire policy covers property damage such as furnishings, office building, machinery, stock, etc. due to a fire accident.
- Besides, fire perils, a burglary insurance policy also provides coverage for the damages caused due to any natural calamity, explosion, bursting of the water tank, etc.
Types of Fire Insurance in India
Here are the types of fire insurance policies in India that you can purchase:
- Bharat Sookshma Udyam Suraksha: This policy provides coverage for the loss or damage caused to the building, property, plant & machinery, stocks and other assets for a sum insured up to Rs. 5 Crores.
- Bharat Laghu Udyam Suraksha: This policy provides coverage for the damage or destruction caused to the building, plant & machinery, stocks and other assets for a sum insured between Rs 5 Crores and Rs 50 Crores
- Special Fire & Special Perils: This is a type of fire insurance contract between the insurer and insured that provides coverage for the loss or damage caused to the building, plan & machinery, stock and other assets for a sum insured exceeding Rs 50 Crores.
There are 5 types of policies specifically under Special Fire & Special Perils insurance (SFSP). They are as follows:
- Specific Policy: A specified sum insured is determined for a particular property and in case of loss the actual loss does not exceed the chosen insured amount
- Comprehensive Policy: This policy provides extensive coverage not only against fire related perils but also provides coverage against any other perils, such as robbery, burglary, civil rampage, etc.
- Valued Policy: At the intimation of the policy, the value of a particular property is determined. Instead of the current market value, the indemnity of the policy is determined which is based on the value of the property. So, the agreed value at the time of purchase is the deciding factor of policy indemnity here.
- Floating Policy: If you deal with fluctuating stocks in different areas. This policy provides coverage for one or more goods at the same time under one premium and one sum assured.
- Valuable Policy: The claim amount is decided according to the current market price of the damaged property.
Characteristics of Fire Insurance
The following are the characteristics of a fire insurance policy, which make it a unique product to others. Let us understand the characteristics, which should not be ignored:
- Covenant of Good Faith: The policy is on the premise of faith between the insurer and the insured. It is essential for both parties to reveal all the facts at the time of policy initiation.
- Covenant of Indemnity: It is an indemnity policy wherein the insurer is liable to cover the loss that occurred. In case of a fire break with no loss, no insurance liability will be offered.
- One-year Policy: The term fire insurance policy is generally for a year but it can be renewed depending on the terms and conditions mentioned in the policy schedule.
- Insurable Interest: The policy is valid when the insured has an insurable interest in the insured property. In case a loss occurs, such interest may be required. This is beneficial to the insured by the survival of the insured property and under a situation of destruction may face a loss as well.
- Direct Loss: If the root cause of the loss or damage is fire, one may avail of this.
- Personal Right: In case of any loss/damage under any unfortunate circumstances, the insured amount will be provided to the person whose name is mentioned in the policy document.
- Personal Insurance Contract: The policy requires complete transparency. The insured must know the insured’s behavior. Also, the insured can only transfer the policy with the consent of the insurer only and the insurer has the right to terminate the policy if their possession of goods is transferred to a third-party.
- Property Description: While buying a fire insurance policy it is imperative to give a proper account of the possession. This is essential because as per the location addressed in the document of the policy, the claims will be settled if in case any unfortunate event occurs at the insured place. In case if there is any change, it needs to be brought to the notice of the insurer to avoid further upshot.
Inclusions Under Fire Insurance in India
Covering a wide range of perils, it is often termed as Standard Fire and Special Perils Policy is also known as SFSP. In the below grid, let us have a look at the inclusion the policy offers:
|Fire Insurance Perils
||The policy provides coverage for any damage caused due to the fire. Besides, any damage caused due to natural heating, own fermentation or unconstrained burning is not included.
||If any damage/loss occurs because of lighting, for instance, cracks in the roof/building area, etc. it will be covered.
||Damage caused by a fire explosion is covered under this policy.
||If any damage happens which leads to fire due to an aircraft, for instance, articles dropped by an aircraft, airborne devices etc. will be covered under the policy.
|Terrorist Activity, Riots/Strike
||Any harm to the protected property caused because of a strike, riot or any fear monger action, is secured by fire insurance.
||Any damage to the insured property due to any natural calamity such as storm, tycoon, etc. is covered under the policy.
||You will be covered for the destruction caused to your property due to a rockslide/landslide.
|Bursting/Overflowing of the Water Tank
||If the property is damaged due to bursting/overflowing of the water tank, it will be covered.
||Setting fire to overgrown bushes/plants may end up damaging the property. This will be covered under the policy. Please note that the policy will not cover the destruction caused due to the forest fire.
Exclusions Under Fire Insurance Policy in India
Here are some of those events that are not covered under Fire Insurance:
- Deliberate, willful or intentional acts
- Loss or damage to stocks in cold storage due to change in temperature
- War, invasion, war-like operations
- Pollution or contamination
- Missing property or mislaid
- Consequential or indirect loss or damages
- Costs, fees or expenses for preparing any claim
- If the insured premises or building remains unoccupied for more than 30 days.
- Unset precious stones, bullion or work of art unless specifically declared
- Loss or damage to any of the electrical machines, short circuits, apparatus, leakage of electricity, etc. This exclusion applies to a particular machine that is lost or damaged.
Eligibility Criteria to Buy Fire Insurance Policy
If you wish to buy a fire insurance policy, the following is the criteria:
- Any person/organisation/institution/firm that may endure or need to insure his/her business from an unforeseen misfortune in case of a fire.
- Anyone who possesses a building, furniture, household articles and so on.
- Retailers or shopkeepers, godown keepers.
- Banks, financial, education, research institutes, and so on.
- Service suppliers include hotel owners, medical clinics, lodging, clinics and so on.
- Manufacturing and industrial firms, transporters.
Add-on Coverage in Fire Insurance
Upon the payment of an additional premium of fire insurance, the insured can benefit the following add-on coverage:
- Wreckage removal
- Forest fire
- Loss of rent
- Start-up cost
- Alternate accommodation
- Unconstrained 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
Selecting Sum Insured for Fire Insurance
Sum insured is one important aspectwhen you buy fire insurance policy. It is of utmost importance to be much careful while choosing a sum insured.
The following things need to be kept in mind while deciding the sum insured for a fire insurance policy:
- Valuables, precious materials or antiques
- Plan and machinery, furniture or other important personal assets
Tips to File Fire Insurance Claim
Filing a claim for fire insurance is simple if approached in the correct direction. Below are steps to claim your fire insurance policy, which are:
- First thing, in case of any unfortunate mishap wherein you need to file a claim inform the insurer at the earliest.
- Furnish a detailed account of damaged properties along with an estimated cost for the equivalent.
- It is imperative to cooperate with the surveyors if they look forward to you for any kind of assistance or additional information.
- Help the surveyor in every manner possible. It might sound annoying but it is better to take a tour of the damaged premises. This will enable a quick settlement against the claim filed.
Documents Required to File Fire Insurance Claim
The following is the list of common documents, which will be required while filling any claim related to fire insurance:
- An authorised copy of the policy, which includes the schedule and clauses.
- The complete duly filled claim form.
- In case, if the incident is published a proof to substantiate the same such as a Newspaper proof.
- Records of previous claims, if any.
- Report by the fire brigade.
- Forensic report wherever is needed.
- A copy of the final investigation report.
The truth is that if you own a business it is always vulnerable to risks despite the precautions you undertake or you use the technological advancements. It is better to take care of the possibilities. It is better to be safe than sorry.
What are you waiting for? Buy fire insurance today!