Fire Insurance to Protect Your Business

Fire insurance, generally known as the Special Fire and Special Perils is a type of property insurance that provides coverage for material damage. The main objective of fire insurance is to provide cover for your property against any physical losses, damage or destruction. The policy pays you the restoration costs, repair costs or replacement costs of the property or any part of the property.

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Types of fire insurance

Fire insurance in India is broadly categorised into three based on the sum insured.

Bharat Sookshma Udyam Suraksha

This fire insurance policy covers the loss, damages or destruction to the business property like stocks, buildings, plant and machinery, fittings and fixtures and other assets of the business for a sum insured up to ₹ 5 crores.

Bharat Laghu Udyam Suraksha

This fire insurance policy covers the loss, damages or destruction to the business property like stocks, buildings, plant and machinery, fittings and fixtures and other assets of the business for a sum insured up to ₹ 5 to 50 crores.

Special Fire and Special Perils Policy

In this type of fire insurance policy, the business property like buildings, plants and fixtures, and other assets are insured against any loss or damage by the perils mentioned in the policy copy. Here the sum insured exceeds ₹ 50 crores.

The Special Fire and Special Perils are broadly categorised into:

Values Policy

In this type of fire insurance policy, firstly the value of the business property is decided. This value is not the current market value but the value the insured and the insurer agreed upon. This applies to those properties where the market value cannot be determined, for instance, old manuscripts, artefacts etc. Hence, this value will decide the sum insured.

Floating Policy

In a floating fire insurance policy, the coverage is offered to business that deals with stocks/goods present at various locations for one sum insured and one premium. This mostly applies to businesses dealing with the import and export of goods.

Comprehensive Policy

A comprehensive policy ensures that coverage is offered to fire-related perils and also offers cover against other perils such as burglary, robbery, etc.‍

Specific Policy
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In a specific fire insurance policy, a sum insured is already decided for your business property. In case of any loss or damage to your property, the cover amount provided will be within the determined sum insured limit.

Replacement Policy

Replacement or reinstatement policy applies to buildings, furniture, machinery and fixtures. The market value of the property is determined and the insured is compensated based on the actual amount required to replace or restore the damaged property.

Consequential loss policy

This type of policy provides compensation for the consequential loss of profits or loss. For instance, a fire outbreak at a manufacturing plant can stop operations and bring down production hence, causing a loss in profits. However, the fixed expenses continue. So, this policy compensates those consequential losses by looking at a loss.

General exclusions in fire insurance

A fire insurance covers damages or loss to the business property by fire or other perils. However, it does not cover certain conditions of these perils.

Some of the general exclusions in fire insurance are:

-Burning of property issued by any public authority is not covered in the policy.

-Repairs, demolitions, construction or alterations to the building or premises are excluded from the coverage.

-Fire caused due to natural heating, spontaneous combustion or its own fermentation by boilers or other apparatus is not covered.

-Any defects in the construction unknown to the insured are excluded.

- Normal cracking, settlement or bedding down of newly constructed property is not covered under the policy.

- Loss, damage or destruction caused by a forest fire is generally excluded. However, an add-on cover can provide coverage.