Industrial facilities invest heavily in buildings, machinery, equipment, stock, and other valuable assets. A single incident, such as a fire, machinery breakdown, flood, or explosion, can lead to significant financial losses and disrupt business operations. Industrial All Risk (IAR) Insurance is designed to protect businesses against such unforeseen events by offering comprehensive coverage under a single policy.
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Industrial All Risk (IAR) Insurance is a comprehensive property insurance policy designed for medium and large-sized industrial businesses. Unlike standard fire insurance, which mainly covers specified perils, an IAR policy provides protection against all accidental physical losses or damages unless specifically excluded in the policy wording.
It covers a wide range of industrial assets, including buildings, plant and machinery, equipment, furniture, fixtures, stock, and other business property. Depending on the policy, it may also include business interruption cover and protection against third-party liabilities through suitable extensions.
Key Features & Benefits of Industrial All Risk Insurance
Industrial All Risk Insurance offers extensive protection to businesses operating in industries where the financial impact of property damage can be substantial.
Some of the key features and benefits include:
Comprehensive protection against accidental physical loss or damage.
Covers multiple risks under a single policy.
Protection for buildings, machinery, stock, furniture, and equipment.
Flexible policy with optional add-on covers.
Suitable for medium and large industrial establishments.
Can be extended to include business interruption and machinery breakdown cover.
Reduces the need to manage multiple insurance policies separately.
What is Covered Under Industrial All Risk Insurance?
The scope of coverage under an Industrial All Risk Insurance policy depends on the insurer and policy terms. Generally, the policy covers sudden and unforeseen physical loss or damage to insured property unless specifically excluded.
Inclusions Under Industrial All Risk Insurance
Coverage
Description
Fire and Lightning
Covers damage caused by accidental fire, lightning, smoke, and resulting loss.
Explosion and Implosion
Covers damage arising from explosions or implosions.
Natural Calamities
Protection against floods, storms, cyclones, earthquakes (if covered), landslides, and inundation.
Burglary and Theft
Covers loss of insured property due to burglary or theft, subject to policy conditions.
Riot, Strike & Malicious Damage (RSMD)
Covers losses caused by riots, strikes, civil commotion, or malicious acts.
Impact Damage
Covers accidental impact from vehicles or falling objects.
Machinery & Equipment
Covers accidental damage to insured plants and machinery.
Buildings & Structures
Covers factory buildings, warehouses, offices, and permanent structures.
Stock & Inventory
Covers raw materials, work-in-progress, and finished goods.
Electrical Installations
Covers electrical panels, transformers, generators, and related equipment.
What is Not Covered Under Industrial All Risk Insurance?
Like every insurance policy, Industrial All Risk Insurance also has certain exclusions. These are situations where the insurer may not accept the claim.
Exclusions Under Industrial All Risk Insurance
Exclusion
Description
War & Nuclear Risks
Damage arising from war, invasion, or nuclear incidents.
Intentional Damage
Loss caused deliberately by the insured.
Normal Wear & Tear
Gradual deterioration, corrosion, rust, or ageing of assets.
Mechanical or Electrical Breakdown
Unless specifically covered through an extension.
Fraud or Dishonest Acts
Losses resulting from fraudulent activities.
Consequential Loss
Indirect financial losses unless Business Interruption cover is purchased.
Pollution & Contamination
Unless specifically covered under the policy.
Existing Damage
Damage that existed before the policy started.
Always refer to the policy wording for the complete list of exclusions.
Add-ons Under Industrial All Risk Insurance
Businesses can strengthen their protection by choosing additional covers based on their operational requirements.
Some commonly available add-ons include:
Machinery Breakdown Cover
Boiler Explosion Cover
Business Interruption (Loss of Profit) Cover
Terrorism Cover
Debris Removal Expenses
Escalation Clause
Architects', Surveyors' and Consulting Engineers' Fees
Temporary Removal of Property
Additional Storage Locations
Earthquake Cover (where not included)
Spontaneous Combustion Cover
These add-ons help businesses customize the policy according to their industry-specific risks.
Industries That Commonly Buy Industrial All Risk Insurance
Industrial All Risk Insurance is suitable for businesses that own high-value assets and require broader insurance protection.
Some common industries include:
Manufacturing industries
Automobile component manufacturers
Steel and metal industries
Cement plants
Textile industries
Food processing units
Chemical manufacturing plants
Pharmaceutical companies
Paper and pulp mills
Plastic manufacturing units
Engineering industries
Electronics manufacturing units
Warehouses and logistics parks
Power generation plants
Industrial parks and SEZs
How is the Sum Insured Decided?
The sum insured should represent the full replacement value of the insured property.
Depending on the type of asset, it may include:
Factory building replacement cost
Plant and machinery value
Furniture and fixtures
Electrical installations
Stock value
Raw materials
Work-in-progress
Finished goods
Underinsuring assets may lead to reduced claim settlement because the Average Clause may apply.
Factors Affecting Industrial All Risk Insurance Premium
The premium is calculated after evaluating the overall risk associated with the industrial unit.
Some important factors include:
Factor
Impact on Premium
Nature of Industry
High-risk industries generally attract higher premiums.
Asset Value
Higher asset values usually increase the premium.
Location
Flood-prone or earthquake-prone areas may increase premium costs.
Fire Protection Systems
Better safety measures can help reduce premiums.
Claims History
Frequent past claims may increase the premium.
Construction Type
Fire-resistant construction may reduce risk.
Occupancy
The type of manufacturing activity influences pricing.
Add-on Covers
Additional extensions increase the premium.
How to Raise a Claim Under Industrial All Risk Insurance?
In the event of a loss, informing the insurer quickly helps speed up the claim process.
Step 1: Notify the Insurer
Report the incident immediately after the loss is discovered.
Step 2: Protect the Property
Take reasonable steps to prevent further damage without disturbing important evidence.
Step 3: Submit Required Documents
Provide the completed claim form along with the supporting documents requested by the insurer.
Step 4: Surveyor Inspection
The insurer appoints a licensed surveyor to inspect the damage and assess the loss.
Step 5: Claim Assessment
The survey report and submitted documents are reviewed before the claim amount is determined.
Step 6: Claim Settlement
Once approved, the insurer settles the claim according to the policy terms and conditions.
Documents Required for Claim Settlement
The exact documents may differ depending on the nature of the loss. Generally, insurers ask for:
Completed claim form
Policy copy
Incident report
Photographs of damaged property
Purchase invoices
Repair or replacement estimates
Stock records (where applicable)
Fire brigade report (for fire losses)
Police FIR (for burglary or theft claims)
Surveyor's documents, if required
Real-Life Example of Industrial All Risk Insurance
Fire at a Manufacturing Unit
A fire breaks out due to an electrical short circuit in a factory, damaging production machinery, finished goods, and part of the warehouse. Since the business has an Industrial All Risk Insurance policy, the insurer covers the repair and replacement costs for the insured assets, helping the company resume operations with minimal financial disruption.
Flood Damage to Industrial Equipment
Heavy rainfall causes flooding inside an industrial plant, damaging electrical panels and production equipment. The policy covers the insured loss caused by the flood, subject to policy terms and applicable deductibles.
Burglary of Industrial Machinery
Unknown persons break into a warehouse and steal specialised industrial tools and equipment. If burglary coverage is included in the policy, the insurer compensates the business for the insured loss after claim assessment.
Conclusion
Industrial businesses face a wide range of risks every day, from accidental fires and equipment damage to natural disasters and theft. A single incident can lead to significant repair costs, production delays, and financial losses. Industrial All Risk Insurance offers comprehensive protection by covering multiple risks under one policy, helping businesses safeguard their valuable assets and continue operations with confidence.
Frequently Asked Questions
What is the full form of IAR Insurance?
IAR stands for Industrial All Risk Insurance. It is a comprehensive insurance policy that covers accidental physical loss or damage to industrial assets unless specifically excluded in the policy.
What is the difference between Fire Insurance and Industrial All Risk Insurance?
A standard Fire Insurance policy mainly covers specified perils such as fire, lightning, and explosion. Industrial All Risk Insurance provides much broader protection by covering accidental physical losses from multiple risks, subject to policy exclusions.
Is machinery covered under Industrial All Risk Insurance?
Yes. Plant and machinery are generally covered under an Industrial All Risk Insurance policy against accidental physical loss or damage, subject to the policy terms and conditions.
Does Industrial All Risk Insurance cover natural disasters?
Most IAR policies cover risks such as flood, storm, cyclone, inundation, and other natural calamities. Earthquake coverage may be included or offered as an optional extension, depending on the insurer.
Does Industrial All Risk Insurance cover theft?
Burglary and theft may be covered if included in the policy wording. The extent of coverage depends on the insurer and the selected policy terms.
Can I customize an Industrial All Risk Insurance policy?
Yes. Most insurers allow businesses to enhance their coverage by choosing optional add-ons such as Machinery Breakdown Cover, Business Interruption Cover, Terrorism Cover, Earthquake Cover, and Debris Removal Expenses.
What is the policy period for Industrial All Risk Insurance?
Industrial All Risk Insurance is generally issued for one year and can be renewed annually to ensure uninterrupted coverage.
Disclaimer: Above mentioned insurers are arranged in alphabetical order. Policybazaar.com does not endorse, rate, or recommend any particular insurer or insurance product offered by an insurer.
+Premium varies on the basis of Occupancy, Business Activity & Coverage Type
. The premium of Rs 3400/year (Rs 283.33 / month) is for a pucca building with sum insured of Rs 50 lakh at selected locations, for property age less than 25 years and policy term of 1 year, rounded off to nearest 10. Additional premium is payable for the optional covers including contents opted. STANDARD TERMS AND CONDITIONS APPLY. For more details on risk factors, terms and conditions, please read the sales brochure carefully before concluding a sale. By clicking on "View Plans" you agree to our Privacy Policy and Terms Of Use and also provide us a formal mandate to represent you to the insurer and communicate to you the grant of a cover. The details of insurance coverage, inclusions and exclusions are subject to change as per solutions offered by insurance providers. The content has been curated based on the general practices in the industry. Policybazaar is not responsible for the factual correctness of these details.
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