Assets Not Covered Under the Fire Insurance Policy

Fire insurance is a type of insurance that financially covers the losses caused to the property due to accidental fire or fire explosion. This insurance policy covers the losses caused by fire during the policy tenure up to a certain agreed sum insured amount. However, there are certain assets that are not covered in the fire insurance policy.

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What Are the Assets Not Covered by the Fire Insurance?

Every insurance policy comes with some exclusions also. Here is a list of assets that are considered fire insurance exclusions-

  1. Valuable items such as precious stones, artworks, manuscripts, drawings, jewellery & ornaments, obligations & documents, coins & paper money, stamps, securities, accounts books, recordings, and explosives, unless specially mentioned in the policy documents
  2. Any cold storage stock or item damaged due to a sudden change in temperature
  3. Intellectual Property Rights (IPR)
  4. Any perishable items, including fruits, dairy items, vegetables, etc.
  5. Damages caused due to short-circuiting, rusted electrical fittings, machines or apparatus, and overloading in the electric circuit
  6. Any asset for which a third party is liable to pay for the losses or damages under the agreement made with the insured
  7. Any other asset that is excluded in the policy.

However, all the items or assets mentioned in the first point can be covered by buying an add-on cover.

Let's understand this with the help of an example- XYZ Trading Limited is an organic fruit juice processing company. It purchases and processes fruits for Rs 80,000 every day.

The company also has a cold storage unit to keep the perishable items before they are taken for processing. But one day, due to short-circuiting, these perishable items got damaged due to the temperature change, and a fire also broke out in the store.

The XYZ Trading Limited raised a claim for the damages caused due to fire. The insurer rejected the insurance claim request because both conditions were excluded under the fire insurance policy.

Does Fire Insurance Covers Gold Exchange Businesses?

In India, gold is one of the precious and pure metals which is purchased during every occasion or festival. There are many gold exchange companies where you can sell your gold and get cash instantly to fulfill your needs by utilising it during emergencies.

However, the question is, does your fire insurance policy cover the gold exchange business? Under the fire insurance policy, the stock or asset in form of jewellery and cash are covered only on the insured declared value basis whereas, for the documents and securities, the insurance company does not provide coverage for damages and losses caused by fire. Therefore, these businesses should take extra care to keep their valuable documents and securities.

Are Third-party Assets Covered in the Fire Insurance?

Xyz Private Limited rents machinery & equipment to ABC Private Limited. As per the contract between the two businesses, XYZ Private Limited will be responsible for any damage caused to the machinery at ABC Private Limited premises due to fire under the fire insurance policy.

ABC Private Limited is not liable to pay for or claim the damages from their own fire insurance for the leased machines because XYZ Private Limited has already purchased fire insurance for them.

Intellectual Property Rights (IPRs) are Covered in Your Fire Insurance?

XYZ & Consulting Group is an innovative business solution. They are delivering various business model innovations, marketing concepts, and branding strategies to different businesses. Under the fire insurance policy, the loss of such branding & marketing documents due to fire damage is excluded. IPRs are excluded from the fire insurance policy, and all the IPRs documents need to be submitted to the central system by the administration to keep it safe from various unforeseen fire instances.

Final Words

Prevention is better than cure and as a business owner, it is better to take preventive measures to ensure the safety of your business premises or the firm. You must insure your business with the right fire insurance policy and check the fire insurance exclusions, inclusions, deductibles, etc., before purchasing the policy.

Written By: PolicyBazaar - Updated: 18 August 2022