9 Perils of Standard Fire Insurance Policy

A fire and special perils policy is a comprehensive insurance designed to secure businesses from a wide range of risks beyond just fire. The policy is inclusive of coverage for damages that assets may sustain such as buildings, machinery, stock, and other business essentials. This ensures financial resilience against unforeseeable eventualities.

This insurance is especially advantageous for SMEs where the impact of disasters can be far-reaching, and could influence the business owner, employees, as well as operations.

Moreover, a fire and burglary insurance policy is designed to offer broad coverage. In addition to damages owing to fire, it also offers coverage against risks such as burglaries, natural disasters, explosions, and man-made calamities.

However, before investing in a standard fire and perils policy, it is important to carefully review the policy terms and make note of the inclusions and exclusions to prevent unpleasant surprises. This also helps businesses secure adequate protection, enabling them to recover swiftly and maintain operational continuity following the accident.

A standard fire & special perils policy offers coverage against a multitude of risks that adversely affect businesses. Not only does this policy safeguard against fire-related damages, but it also extends to several associated risks to offer comprehensive coverage for businesses. Below is a list of the key standard fire policy perils that are part of the coverage:

-Fire

Any damage owing to a fire is included in the coverage. It provides compensation for damage to property, assets, or goods due to fire, safeguarding against unforeseen incidents. However, the policy excludes coverage against:

• Damage caused by natural heating

• Damage occurring during the heating or drying process

• Damage resulting from fermentation

• Losses due to spontaneous combustion

Burning of insured assets as a result of orders from Public Authorities

-Lightning

The policy covers damage from lightning strikes. This peril provides coverage for physical damage to the property and any structural harm caused by lightning strikes, such as cracked walls or electrical fires that result from the strike.

-Explosion/Implosion

Damages caused by explosions or implosions are included in the coverage, aside from machinery like boilers or steam-producing apparatus. The coverage ensures you are compensated for any destruction caused by such events.

-Aircraft Damage

If your property is damaged by aircraft or helicopters, this fire and special perils provide coverage. This not only includes direct damage from aircraft crashes but also debris or objects falling from these devices that may harm your property.

-Riot, Strike, or Terrorist Activities

The coverage is inclusive of damages caused by external violence such as riots, strikes, or terrorism. This policy can financially safeguard your assets from such events.

-Natural Disasters

Protection against storms, cyclones, hurricanes, floods, and other natural calamities is a part of fire and special perils coverage. This ensures that your property remains financially safeguarded from damage caused by extreme weather events.

-Subsidence and Landslide

The policy offers coverage against damages caused by landslides or subsidence. This means that if your property is affected by landslides due to natural causes, the insurance will provide financial protection to help restore the damaged property and minimise losses.

-Bursting/Overflowing of Water Tanks and Pipes

Damages caused by water system failures are a part of the coverage under the fire insurance policy. This peril covers the resulting harm from such incidents, ensuring your property is protected from leaks, bursts, or flooding due to system failures.

-Bush Fires

Damages sustained owing to bushfires are also included in the coverage. The insurance policy will provide compensation for the loss or destruction caused by the bushfire, safeguarding your assets from such unpredictable natural events.

The fire and special perils policy ensures that businesses are protected against critical risks and aids them in recovering against both financial as well as operational risks. Knowing the scope of the coverage helps businesses make informed insurance decisions and choose robust coverage.

Although a standard fire and special perils policy provides extensive protection, it is important to make note of the exclusions to steer clear of any unexpected financial setbacks. With that in mind, here is a list of the key exclusions under a standard fire and perils policy:**

-Excess Amount: Any loss that is below the deductible threshold of the insurance coverage, as outlined in the policy terms, is excluded.

-Contamination or Pollution: Damages incurred owing to contamination or pollution do not fall under the policy’s purview.

-Nuclear Risks: The policy does not compensate for loss or damage caused by nuclear activity, radiation, or associated dangers.

-Valuable Items: The insurance does not offer coverage for damages or loss of unset precious stones, bullion, works of art, securities, money, plans, and other miscellaneous items.

-Cold Storage Stock: Any loss or damage to stock in cold storage because of temperature fluctuations is not covered by insurance.

-Electrical Failures: Although fire damage to property is included in the policy coverage, any damage to specific electrical equipment caused by short circuits, overloading, or electrical arcing does not fall under the coverage purview.

-War and Hostilities: Loss or damage because of war, invasion, civil unrest, or other similar situations is excluded.

-Professional Fees and Debris Removal: Generally, professional fees are only covered up to 1%, and debris removal is up to 3% of the claim amount. Any additional expenses aside from these are excluded from the policy coverage.

-Indirect Losses: Consequential damages such as loss of market, earnings, or delays are not included under a standard fire and perils policy.

-Natural Convulsions: Unless the policyholder has purchased specific add-ons for them. Natural disasters such as earthquakes, volcanic eruptions, and similar phenomena are excluded from coverage.

-Relocation of Property: Any damage to the insured property will not be covered if the same has been moved to an unlisted location unless they have been relocated temporarily for repairs or cleaning.

The standard fire & special perils policy can be improved with add-on riders to offer broader protection. These optional coverages are offered at an additional premium to address specific concerns and expenses that are not a part of the basic coverage.

Some functional add-on policies include:

• Coverage from damages because of forest fires, earthquakes, and spontaneous combustion.

• For businesses that have cold storage, security against stock deterioration owing to power failures is available to make their standard policy more robust.

• The policy could further be strengthened with material spoilage, contamination, and leakage covers for wholesome protection.

• Moreover, expenses such as debris removal, consulting fees of professionals such as engineers, and costs of alternative accommodation could also be included in the policy coverage.

• For more well-rounded protection, businesses could also choose terrorism coverage or extend protection to stock that has temporarily been moved.

To offer convenience and save time, insurance companies now offer the ability to invest in fire and burglary insurance online. This makes it easier to customise policies with appropriate add-on riders to meet the unique requirements of each business.

Choosing the right fire insurance is essential for securing your business against unforeseeable risks. With comprehensive policies such as fire and burglary insurance, you can appropriately safeguard your assets, minimising financial disruptions.

As a reliable insurance provider, TATA AIG offers insurance seekers customisable solutions for businesses of all sizes. TATA AIG has made it easy to invest in fire and burglary insurance online, making coverage seamless and efficient.

For reliable and well-rounded business insurance in India, it is important to make sure your insurance company offers robust and diverse policies with appropriate support and reliable customer service. This ensures that your business can focus on growth by being prepared against unforeseen events.

Who should invest in standard fire and perils policy?

Fire insurance is highly advantageous for SMEs, manufacturers, and businesses with physical assets such as buildings, machinery, and inventory.

What are the recommended add-ons for a fire insurance policy?

Recommended add-ons for fire insurance include earthquake cover, spoilage cover for perishable goods, terrorism cover, debris removal cover, impact damage cover, and alternate accommodation costs.