Kinds of Fire Insurance Policies for Your Startup

Why Fire Insurance is Essential for Startups

Before taking a leap of faith and jumping into the big pool of the startup world, consider understanding and assessing risks from all corners. During an unfortunate event, startups or SMEs need a safety net to fall back on.

You might have taken necessary precautions and installed various fire safety equipment in your office or warehouse. But unimaginable accidents can still occur, leading to disruption, damage, and irreparable losses to your business. This makes fire insurance for start-up an imperative buy.

If you are still giving fire insurance a second thought, here are a few points that can help you make a wise decision.

• It can help cover huge losses and damages
• Replacement of damaged goods
• You share the financial burden with the insurance provider
• A fire insurance policy will pay for the compensation for the medical expenses of injured employees (if any)
• It gives you a sense of security

Kinds of Fire Insurance

Now that we have identified the need for fire insurance for businesses, it’s time to know the kinds of fire insurance offered best suited to your needs. In January 2021, The Insurance Regulatory and Development Authority of India (IRDAI) issued guidelines allowing insurance companies to design customized products for micro and small enterprises, ‘Bharat Sookshma Udyam Suraksha’ and ‘Bharat Laghu Udyam Suraksha’.

1. For Sum Insured up to Rs 5 Crores

   Bharat Sookshma Udyam Suraksha: This policy provides cover for the plant & machinery, building, stock and other assets up to Rs. 5 crores.

2. For the Sum Insured between Rs 5 Crores and Rs 50 Crores

   Bharat Laghu Udyam Suraksha: This policy provides cover for the plant & machinery, building, stock and other assets above Rs. 5 crores but not exceeding Rs. 50 crores.

3. For Sum Insured beyond Rs 50 crores

   Special Fire & Special Perils (SPSF): This policy provides cover for the plant & machinery, building, stock and other assets above Rs. 50 crores. There are five policies majorly under this category:

   1. Valued Policy: Under the valued policy, the value of the subject matter is decided at the time of the purchase of the policy. In damage or loss, the insurer pays the pre-decided amount to the insured. For instance, if you take a fire insurance policy of Rs. 5 lakhs and the loss incurred is more than the actual loss, the insurer would pay a predetermined amount. The insurer does not assess the actual loss.
   2. Valuable Policy: In this policy, the claim amount is decided as per the current market price of the damaged property and not at the time of purchasing the policy.
   3. Specific Policy: This policy only covers the risk up to a specific sum. For example, consider a retail startup that purchased fire insurance of Rs. 30,000 for content valued at Rs. 50,000. The startup will be entitled to the entire claim if a loss of Rs. 30,000 or below is incurred due to fire. Even if the losses incurred would have been higher than INR 30,000, the insurer would have only paid the predetermined specific sum.
   4. Floating Policy: This policy covers goods situated at different places, provided they belong to the same person. A manufacturing startup has two warehouses in different locations. You can buy a floating policy for these warehouses at an average premium.
   5. Comprehensive Policy: This type of policy includes multiple risks like explosions, burglary, labor disturbances, lightning, etc., making it highly recommended.

Conclusion

A fire insurance policy for your startup is like having damage control at your fingertips. If your startup does not have an adequate fire insurance policy, the repercussions can make a big hole in your pocket. Knowing the significance of fire insurance, Policybazaar can help you compare and buy the right policy for your startup.