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Exploring the Types of Fire Insurance Policy in India

Fire-related incidents are in the surge. In the past six months, Mumbai witnessed 12 major fire outbreaks leading to many deaths. Mumbai is not alone. The devastation made by fire is also common in other states as well. When the wreckage of fire is immense, the extent of damage could be alleviated up to a certain point with fire insurance!

Decoding Fire Insurance

Fire insurance is a kind of contract between the insurance company and the insured, where the insurer assures to cover the damages and losses caused by fire eruption. The policy helps the insured to cover the risk of loss of property by accidental fire cases, in exchange for an annual premium.

The policyholder can claim up to a specified limit mentioned in the policy. the extent of the loss is measured by the insurance investigator and estimation of loss is prepared, the basis of which the insurers compensate for the loss. However, the insurer is liable to pay only up to the actual amount of loss not exceeding the maximum policy coverage.

If you too own a business entity and want to protect it from possible eventualities, do consider fire insurance. You will find a number of types of fire insurance in the market.  Fire insurance companies in India have introduced a variety of insurance policies to cater to the different needs of the individual. However, the below-deciding factors should be considered in order to ensure the right plan:

  • Type of risk the organisation can be exposed to
  • Type and nature of the property to be insured
  • What's the content of the property
  • Occupancy risks
  • Exposure risks
  • The time element

Who can Opt Fire Insurance Policy?

The fire insurance is meat for:

  • Any person/institution /firm/organisation/ who may expose to financial loss or damage in case of fire outbreak
  • Owners of Building and contents such as household articles, furniture etc.
  • Godown keepers and shopkeepers
  • Educational institutions, research institution, Bank or other financial, institution, trusts, charitable institutions
  • Hospitals, hotels, clinics, lodging and boarding centres or other related service providers
  • Manufacturing firms, industrial entities
  • Transporters

What’s Stored for You?

Under a fire insurance policy the following circumstances are covered:

Damages Caused by Fire

  • Lightening
  • Explosion/Implosion
  • Storm, Typhoon, Hurricane, Tornado, Flood and Inundation
  • Riot, Strike, Malicious Damage, Aircraft Damage
  • Missile testing operations
  • Impact damage
  • Bursting and overflowing of water tanks, apparatus and Pipes
  • Subsidence and landslide including Rockslide
  • Bush Fire
  • Leakage from Automatic Sprinkler Installation

Types of Fire Insurance in India

The various types of fire insurance in India include:

1. Valued Policy

Under Valued Policy, the value of a subject matter is decided, upon which the insurer pays if it is destroyed or damaged. This policy doesn’t work on the principle of indemnity. The agreed value that is compensated can be more or less than the market price. This policy is designed for the goods and properties which actual value can’t be decided after their damage or loss. Usually, the work of art, jewellery, paintings, crafts etc. come into this category.

2. Specific Policy

This policy paid up to the specific amount the risk is insured. In case of a fire loss, the insurer will pay for the loss that is less that the specific amount or up to the sum insured. Let’s say, a policy is taken to cover a property worth value Rs. 80,000, for sum insured Rs. 50,000. When the property sees a loss of Rs. 40,000, the insurers have paid the full amount. If the loss is up to Rs. 50,000, the full amount will be paid. But if the loss exceeds Rs. 50,000, the insurer will pay up to the insured amount. However, the insured isn’t penalised for availing a policy for a lesser amount, as the value of the property is not taken into consideration.

3. Average Policy

When an average clause is applicable to fire policy, it is called Average Policy. This clause is used to penalise the policyholder for taking up a policy with a lesser amount than the actual value of the property. The compensation amount is proportionately reduced in case the value of the policy is less than the insured property.

Let’s say if you own fire insurance of worth Rs. 20,000 when the value of your property is Rs. 30,000. In case of fire damage of around Rs. 50,000, the insurer will pay you up to Rs. Rs. 10,000 (20,000/30,000 x 15,000) and not Rs. 15,000. It discourages the policyholder to get an under-valued policy.

4. Floating Policy

This policy is tailor-made for the businessmen who deal in import and export businesses. The floating policy is taken to cover the goods of an organisation lying at the different places, provided the goods should belong to one person. The premium charged is the average premium that would have been paid, in case a specific policy would have been taken for all these goods. The insurer may put its own clause and conditions.

5. Comprehensive Policy

By opting for a comprehensive policy, the insured can be well assured for fire, explosion, lightning, burglary, riots, labour disturbances etc. A single policy covers multiple risks, thus, comprehensive insurance is highly recommended.

6. Consequential Loss Policy

 Due to a fire incident, factory works will be at a halt. Production will go down despite the fixed expenses continue at the same rate. With a consequential loss policy, all these losses can be covered. This policy pays the policyholder for the loss of profit by calculating the compensation on the basis of loss of sale.

7. Replacement Policy

Under this policy, the insurance providers assure compensate for the loss on the basis of the market value of the property. Thus, the amount to be compensated is calculated after considering the depreciation value of the property. The policy ensures that the compensation will be on the replace price. So, the new asset will be of a similar price that has been lost. As the compensation will be on the market price of the new assets, it is replaced without an additional expense.

The aforementioned types of fire insurance in India can be considered while taking up a plan. You should analyse your needs first, compare the policies and premium, in order to settle down with the adequate insurance. In this regard, online insurance comparison of fire insurance will go long run. You can be benefited with various insurance quotes as well which serve you in availing the choice of your insurance. Another most important aspect to be considered is the fire insurance claim and how the insurer’s reputation in paying off the claims.

Conditions on which Ground the Claim is Excepted

Your claim will be accepted on the following grounds only:

  • No claim arising out of damage or loss due to high temperature. The loss must be by actual fire explosion or ignition and not by other means.
  • The actual or nearby cause of the loss should be fire
  • The loss or damage must recount to subject matter of fire policy
  • The explosion must be either of the goods or of the property where goods are kept.
  • The incident should be accidental, no coverage is offered for the intentional Even the fire is caused due to the malicious act of the policyholder, the claim will not be entertained by the insured.

Concluding with a Live Example!

Pune-based Kant Dabholkar while sharing his experience said that the loss or damage encountered during a fire outbreak is no doubt a shocking one but you can’t replace the loss of lives. When he suffered from two fire cases in his press, there was no casualty thankfully. However, watching the flames reaching out to touch the sky is horrifying. The only time when the importance of fire insurance can be realised then, said Mr Dabholkar!

Contribute your share towards protection your business form fire-related perils. Purchase fire insurance today and stay protected for tomorrow!