Factors Affecting Fire Insurance Premiums for Factories

A fire insurance policy is designed to cover those losses that a business owner has to incur due to unforeseen circumstances, particularly, a fire breakout.

Fire insurance mainly comes into play when an accidental fire in a factory or godown destroys the property and goods stored in it.

In such a scenario, the insurance company provides compensation to the business to help it cover the repair and replacement costs without facing a huge financial burden.

At the time of purchasing fire insurance, there are many things that you should consider. Out of which, the factors affecting insurance premiums for factories remain the most important. Here is a brief explanation of the most important ones:

The Condition of Premises/Factory

The quality of material used in the construction of a factory, how much time has passed since its construction, and the robustness of the structure of the building, are the main things that influence the premium of fire insurance.

Besides, in case your factory is equipped with fireproof materials, the fire insurance premium charged may be lower than usual.

History of Land and Claims Made

History of fire breakouts and insurance claims made by the owner in the past can lead to higher premiums as the factory will be considered high-risk.

Security Systems

The presence of fire protection systems influences the fire insurance premium calculation formula. Having a sprinkler and fire alarm system in the factory reduces the chances of a fire breakout. Moreover, dealing with hazardous goods carefully also helps in avoiding abrupt fire.

Implementing these suggestions in your factory will provide you with the advantage of paying lower premiums for a fire insurance policy.

The Location of the Factory

If your factory is situated in a risk-prone area i.e., an area where natural disasters (such as wildfires, landslides, earthquakes, etc.,) are common, then you will have to pay a higher premium to get your factory insured against fire.

Along with this, the response time of the fire department of the area is also taken into account by the insurer when calculating the premium.

Nature of Business Activity

The nature of business impacts the premium amount as a business that deals with hazardous goods can have frequent mishaps. So, the insurers also consider the business description and charge the premiums on insurance policy for factory buildings accordingly.

Deductibles

The amount of expenses covered by the insured himself is called a deductible. The higher the deductible, the lesser the premium, because when you pay more, the insurance company has to pay less. In this way, deductibles are also another factor that affects the rate of premium of fire insurance.

Before purchasing fire insurance, it is essential to know the factors that affect the final price of your policy. Doing so helps in ensuring that you are paying the right amount for the right coverage.

With Tata AIG, you can get a tailored fire insurance plan for your factory, best suited to your requirements. Besides, our add-on covers provide extended coverage at the most reasonable price.

For more information about fire and burglary insurance and its premiums, explore our Tata AIG website.

What are the factors which affect the premium of a policy?

When calculating premium, factors such as age, occupation, past medical history, sum insured, and coverage offers are taken into account.

What are some exclusions of fire insurance?

A fire insurance policy does not cover the losses incurred due to deliberate actions of the insured or his employees. Besides, it also does not cover the damage caused because of war or war-related situations.