Industrial All Risk (IAR) Insurance

What is Industrial All Risk (IAR) Insurance?

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

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

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:

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.