Deciding on The Sum Insured under Fire Insurance Policy

Insurance providers and aggregators have recognized the potential of the fast-growing Small and Medium Enterprises (SMEs) sector. As a risk mitigation tool, a fire insurance policy is highly effective in keeping businesses afloat during difficult and unprecedented times. However, more than just picking up an insurance policy, it is imperative to decide on the correct sum insured under a fire insurance policy.

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Sum Insured under Fire Insurance

The main aim of insurance is to put the insured either in the same financial position as he was at the time of loss or in a relatively better position than he would have been after the occurrence of the loss. The purpose of taking insurance is to get covered and getting an adequate sum insured would help in getting the benefit of the insurance coverage.

Determining the Sum Insured under Fire Insurance Policy for Each Property Type

  1. Building: The valuation is calculated based on the built-up area and other constructional specifications. The current cost of construction for similar buildings can also be taken into account to check the valuation. Thus, a Depreciated Value Policy or Reinstatement Value Policy is usually applied to buildings.
  2. Plant and Machinery, Furniture, Fixtures and Fittings: The main factor to be taken into account for determining the value of plant and machinery includes the age of the machinery, availability of similar machinery in the market and its pricing, cost of the original machinery, inflation rate, etc. Plant and machinery can also be insured on a Depreciated Value or Reinstatement Value.
  3. Stocks: The valuation of stocks for the sum insured is mostly based on the market value. The valuation differs depending on the stage at which the stocks are. The calculation process is different for the sum insured for raw materials, the stocks in work-in-progress, finished goods, and waste materials.
  4. Other Valuables and Antiques: Valuation of these items cannot be done on the market value. Hence, the insured and insurer agree upon a specific value at the policy issuance time. This type of policy is called an Agreed Value Based Policy.
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Conclusion

Making an informed decision when buying a fire insurance policy is thus very important. As a buyer of an insurance policy, you should thus carefully establish the sum insured for the said property. You can seek the assistance of qualified professionals from Policybazaar to get an adequate sum insured under a fire insurance policy.

Written By: PolicyBazaar - Updated: 08 August 2023
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Policybazaar for Business - Fire Special Perils Insurance - Customer Reviews
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4.3/5
Based on 83 reviews
4.3
out of 5
Based on 83 reviews
13 users
66 users
4 users
0 users
0 users
4.8 October 09, 2022
Aaftab
Amazing Customer Support
I am using a fire insurance policy from policybazaar and experienced amazing feedback from them in claim settlement. I have a sports merchandise shop that caught fire last yearI raised a claim which was resolved within a few days without any hassles.
Thiruvananthapuram
4.8 October 08, 2022
Balachandar
Helpful Support
The support team of Policybazaar is really helpful and prompt. They solve all your queries fast. Would definitely recommend Policybazaar for purchasing insurance .
Mangaluru
4.8 October 07, 2022
Raahim
Extensive Cover
Got a fire insurance policy for my shop and it was really extensive with so many features. Purchased it from Policybazaar without paying any commission fees. Great coverage.
Bengaluru
4.5 October 06, 2022
Aadi
User Friendly Website
We deal in the cotton industry and suffered a huge loss last year because of the fire. We were looking for insurance to safeguard us financially from any such incident in the future. We landed on the policybazaar website and bought fire insurance. Their website is well managed and gives all the necessary information.
MP
4.8 October 05, 2022
Rohit
Plans Are In Budget
Had to purchase a fire insurance which should be in my budget as I run a very small store. Got a lot of affordable plans on Policybazaar and purchased the one that suited my budget. All plans are in budget and with so many features.
Bhopal
4.3 October 04, 2022
Baban
Covered My Shop
I have a shop of garments and it caught fire last year in which I lost items worth thousands. Purchased a fire insurance from Policybazaar and now I feel really relieved that it would financially cover my shop in such circumstances.
Chandigarh
4.3 October 03, 2022
Aarnav
Faster Claim Settlement
A part of my warehouse having thousands of material caught fire. Luckily I had a fire insurance policy that I could claim and received compensation from them. It was such a relief. The claim settlement team at Policybazaar is helpful and really quick.
Assam
4.5 October 02, 2022
Jagadish
Affordable
I have a warehouse of clothes and was planning to buy a fire insurance policy to cover my material from unwanted fire. Got a really affordable plan from Policybazaar with some really great features.
Ahemdabad
4.5 October 01, 2022
Rahul
Budget Friendly
Wanted to cover my crockery shop from fire and was searching for an affordable plan. Found a great plan at Policybazaar which suited my budget.
Surat
4.5 September 30, 2022
Baabul
Instant Purchase
Wanted a fire insurance policy for my crockery business and could purchase it instantly from Policybazaar. The process was quick instant and very easy.
Gurgaon