The 12 Perils of Standard Fire Insurance Policy

As per the India Risk Survey Report 2021, businesses consider fire the fourth disruptive risk. Fire is voted the third most significant risk for the manufacturing sector. Fire insurance policies have thus been a major purchase for businesses in recent years. This policy safeguards the insured against unforeseen losses caused due to fire and allied perils. The perils of standard fire insurance policy can be both natural or manmade.

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Fire Insurance Policy for SMEs

Fire incidences can be disastrous to companies leading to a financial, physical and mental impact on the owner of the business as well as the employees. The right insurance policy can take care of the financial burden. Before you buy a fire insurance , it is always a great idea to thoroughly understand the inclusions and basic exclusions.

The first step to understanding the policy you wish to buy is to know the common perils of standard fire insurance policy that may be covered. A typical fire policy covers buildings, plant and machinery, stocks and other assets.

Some Common Perils of Standard Fire Insurance Policy

  1. Fire: Generally, any damage caused due to fire is covered under a fire insurance policy. However, there are a few exclusions like the damage or destruction caused by its fermentation or natural heating.
  2. Lightning: Damages caused due to lightning, for instance, damage to the roof or the building, are covered under the standard fire policy.
  3. Explosion / Implosion: If your insured premise is damaged due to a fire caused by either explosion or implosion, a fire insurance policy will cover damages caused by both. However, perils of standard fire insurance policy coverage exclude losses caused to:
    • Boilers
    • Economizers
    • Machinery or apparatus in which steam is produced
  4. Aircraft damage: Damage or loss caused by an Aircraft or any other aerial devices or articles dropped from them are covered under special perils insurance
  5. Riots, strikes, or terrorist activity: Perils of standard fire insurance policy coverage includes the losses or damages caused by external, violent situations like riots, strikes, or terrorist activity.
  6. Natural calamities like storms, cyclones, hurricanes, and floods: When you opt for a standard fire insurance policy, you safeguard your business property from natural disasters that can cause huge losses and destruction. However, it is to be noted that a standard fire policy does not cover earthquakes or volcanic eruptions. You can opt for an additional cover for the same.
  7. Impact damage: This policy also covers damage or loss caused to the property due to the impact of any vehicle or animal being in direct contact with the property. The said vehicle or animal should not belong to the insured, the occupier of the premise or an employee present during his employment.
  8. Subsidence and landslide: In case of an unfortunate event of a landslide or subsidence that may cause damage to your property, a standard fire insurance policy can get you covered. Exclusions to this include:
    • Normal cracking or bedding down of the insured property
    • Coastal erosion
    • Defective design or materials
  9. Bursting/overflowing of water tanks, pipes and apparatus: This policy covers damages of busting of pipes, water tanks and apparatus.
  10. Missile testing operations: Standard fire and special perils insurance also provide coverage for damages caused due to missile testing operations.
  11. Leakage from automatic sprinkler installations: Perils of standard fire insurance policy coverage includes accidental leakage from automatic sprinkler installations. But any damages caused while repairing or making alterations to the building, removing/extending the sprinkler installation or any other defect the insurer already knew are excluded.
  12. Bush fire: Bush fire causing damage to the property is covered under the fire insurance policy. However, it is to be noted that forest fires are not included in this policy.

Conclusion

For Small and Medium Enterprises (SMEs) or start-ups, damages caused due to fire can be financially exhausting. Not just damaging the property, a fire can also bring your business to a standstill. You can replace or repair the damages with fire insurance and keep your business running. All fire insurance policies usually cover the above-mentioned perils of a standard fire insurance policy. However, it is always recommended to get in touch with an expert before purchasing any insurance policy for your business.

Written By: PolicyBazaar - Updated: 09 August 2022