Fire Insurance

What are the different types of fire insurance policies?

Bharat Griha Raksha, Bharat Sookshma Udyam Suraksha, Bharat Laghu Udyam Suraksha, Standard Fire & Special Perils Policy, and more.

How does one fix the sum insured?

Sum insured can be based on Market Value (MV) or Reinstatement Value (RIV). MV considers depreciation, while RIV covers replacement costs without depreciation.

What will be the cost of a fire insurance policy?

The cost depends on factors like perils covered, value of items, premises usage, location, and construction. Premium rates vary between insurers.

How does one arrive at the value of assets in dwellings, offices, or industries?

Industrial units or offices have asset values in their books. For dwellings, categorize assets like furniture, fixtures, and electronics to determine the sum insured.

Can I ask for cancellation of policy mid-term? Will I get any premium refund?

Yes, you can cancel the policy mid-term. At the insured’s option, a short-period scale retention of premium is applied, and the balance is refunded. At the insurer’s option, a pro-rata refund of premium is given.

In case of loss, what are the obligations of the insured?

If I insure for a higher value, will I get a higher claim amount?

No, the claim amount is based on the actual loss suffered. Over-insurance results in overpayment of premium without additional claim benefits, while under-insurance leads to proportional compensation.

Can items like jewelry, ornaments, and artworks be covered by the general fire insurance policy?

Generally, a standard fire insurance policy does not cover items like jewelry, ornaments, and artworks unless specifically mentioned and valued. These can be covered upon request and subject to valuation.

I have taken an insurance policy covering my building. My bank which has financed my business has also taken insurance separately. Both policies are in force covering the same property. What happens in the event of a claim?

In the event of a claim, each insurer will pay their proportionate share of the loss based on their respective sums insured. The principle of contribution ensures the insured is compensated without profiting from the claim.

What is the relevance of salvage?

Salvage refers to the remaining value of damaged property. After a claim is settled, the salvage becomes the property of the insurance company. The amount realized from salvage disposal is deducted from the claim amount.

I need to cover my jewelry. What policy should I take?

You should opt for an ‘All Risks’ policy for covering jewelry. Ensure the jewelry is correctly valued and proof of valuation is available for claim purposes.

I want to cover my household goods against burglary when I am away. Can I get a burglary insurance policy?

Yes, a burglary insurance policy covers goods against the risk of burglary. Some policies may cease if the house is unoccupied beyond a certain period unless the insurer is informed and agrees to extend the cover.

How do you define Small and Medium Enterprises (SME)?

According to the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006:

• Micro enterprise: Investment in plant and machinery does not exceed Rs. 25 lakh.
• Small enterprise: Investment in plant and machinery is more than Rs. 25 lakh but does not exceed Rs. 5 crore.
• Medium enterprise: Investment in plant and machinery is more than Rs. 5 crore but does not exceed Rs. 10 crore.

As an SME, what Fire insurance can I buy?

SMEs can buy a variety of fire insurance policies covering risks like fire, flood, earthquake for buildings and contents, machinery breakdown, electronic equipment damage, workmen compensation, public and professional liability, money-in-transit, fidelity guarantee, and more.

What is insurance on first loss basis? When can I take insurance on first loss basis?

Insurance on first loss basis is when the sum insured is based on the maximum probable loss at any one time, rather than total value. It is suitable when total loss is unlikely, such as theft of bulk items. The insurer covers the loss up to the agreed sum insured without applying the condition of average.

What is condition of Average?

Condition of average applies when the insured property is undervalued. In the event of a claim, the insurer pays only a proportionate amount of the loss, reflecting the ratio of the insured value to the actual value.

What is a deductible?

A deductible (or excess) is the portion of the claim that the insured must bear before the insurer pays the remaining amount. It helps reduce minor claims and lower premium costs.

What is depreciation in insurance?

Depreciation in insurance refers to the reduction in value of an asset over time due to wear and tear, age, or obsolescence. It is deducted from the claim amount to reflect the asset’s current market value or condition.

Can Fire Insurance be purchased for less than one year?

Yes, fire insurance policies can be purchased for periods shorter than one year.

Will Fire Insurance cover premises on rent?

Yes, fire insurance can cover premises on rent. Whether you are a landlord or a tenant, you can purchase fire insurance to protect the property and its contents from fire and allied perils. For landlords, the policy typically covers the building structure, while tenants can insure their personal belongings and improvements made to the rented space. It is crucial to clearly specify the interest in the property and ensure that the coverage details are accurately reflected in the policy to avoid any disputes during a claim.

What is silent risk in Fire Insurance?

Silent risk refers to factories where no manufacturing or storage activities are carried out continuously for 30 days or more. Silent rates are not applicable if a risk goes silent following a loss under the policy.

What is Valued Policy in Fire Insurance?

Valued Policy can be issued for properties whose market value cannot be ascertained, such as curios, works of art, and obsolete machinery. A valuation certificate must be submitted and found acceptable by the insurers.

What is long term policy in Fire Insurance?

Long Term Policy can be issued only for dwellings and must exceed 12 months. Premium for the entire policy period must be collected in advance. Mid-term inclusion of perils is not allowed, and no refund is given for mid-term cancellation.

What is Kutcha Construction in Fire Insurance ?

Kutcha Construction refers to buildings with walls and/or roofs made of wooden planks, thatched leaves, grass, hay, bamboo, plastic cloth, asphalt cloth, canvas, tarpaulin, or similar materials.

What is Escalation clause in Fire Insurance ?

The Escalation Clause in Fire Insurance allows for an automatic, regular increase in the Sum Insured during the policy period. This clause applies to buildings, machinery, and accessories, but not to stock. The Sum Insured at any time is assessed after applying the Escalation Clause, and the pro-rata condition of average continues to apply.

What is Floater Fire Insurance Policy ?

A Floater Fire Insurance Policy covers stocks at various locations under one Sum Insured. This policy ensures comprehensive coverage without specifying exact location.

What is Declaration Based Fire Insurance Policy ?

Declaration-Based Fire Insurance Policy is designed to manage frequent fluctuations in stock values. Key points include:

• Minimum Sum Insured Rs. 1 Crore across one or more locations, with at least Rs. 25 lakhs at one location.
• Monthly Declarations: Insured must submit monthly declarations based on either the average daily value or the highest value during the month by the last day of the succeeding month.
• No Reduction in Sum Insured: Reduction in sum insured is not allowed.
• Premium Refund: Refund on adjustment or cancellation is capped at 50% of the total premium.
• Loss Assessment: If a loss occurs and the last declaration is less than it should have been, the claim is reduced proportionately.

What is Floater Declaration Fire Insurance Policy ?

Floater Declaration Fire Insurance Policy combines features of both floater and declaration policies. Key points include:

• Minimum Sum Insured Rs. 2 Crores.
• Retention: Minimum retention of 80% of the annual premium.
• Monthly/Quarterly/Half-Yearly Declarations: Insured declares values within 90 days of the period’s end.

What is the meaning of Occupancy in Fire Insurance ?

In Fire Insurance, Occupancy refers to the classification of a building or space based on its use or the type of activities conducted within it. Different occupancies are rated differently based on the associated risk levels. For example, dwellings, offices, hotels, shops, industrial facilities, and storage areas each have specific rates and conditions under the fire insurance.

Does Fire Insurance Premium have any discount for Fire Fighting arrangement in premises ?

Yes, Fire Insurance premiums can have discounts for fire fighting arrangements in the premises.

Can an insured party voluntarily select specific assets to cover under Fire Insurance?

No, it is not permissible to issue a policy covering only certain portions of a building or specified machinery, except for Boilers. Policies must cover the entire interest of the insured at one complex/compound/location.

What damage is not covered under Riot, Strike & Malicious Damage ?

Under Riot, Strike & Malicious Damage (RSMD) coverage, the following damages are not covered:

• Total or partial cessation of work or interruption of any process.
• Permanent or temporary dispossession resulting from confiscation, commandeering, or destruction by government or lawfully constituted authority.
• Permanent or temporary dispossession resulting from unlawful occupation.
• Burglary, housebreaking, theft, larceny, or any such attempt.
• Any omission of any kind of any person, whether or not such act is committed in the course of a disturbance of public peace, in any malicious act.

What is Under Insurance in Fire Insurance?

Under Insurance in Fire Insurance occurs when the insured property’s value at the time of a loss is greater than the sum insured. In such cases, the insured is considered to be their own insurer for the difference and must bear a rateable proportion of the loss.

What is Impact Damage in Fire Insurance?

Impact Damage in Fire Insurance refers to loss or visible physical damage caused to the insured property due to impact by any rail/road vehicle or animal not belonging to or owned by the insured or any occupier of the premises or their employees while acting in the course of their employment.

What is covered under Bush Fire?

Bush Fire covers loss or damage caused by bush fires. However, it excludes loss, destruction, or damage caused by forest fire.

What is covered under Leakage from Automatic Sprinkler Installations?

Leakage from Automatic Sprinkler Installations covers loss or damage caused by leakage from automatic sprinkler installations. However, it excludes damage caused by:

• Repairs or alterations to the buildings or premises.
• Repairs, removal, or extension of the sprinkler installation.
• Defects in construction known to the insured.

What is Covered under Subsidence and Landslide including Rock slide?

Subsidence and Landslide including Rock Slide covers loss or damage directly caused by the subsidence of part of the site on which the property stands or landslide/rock slide. However, it excludes:

• Normal cracking, settlement, or bedding down of new structures.
• Settlement or movement of made-up ground.
• Coastal or river erosion.
• Defective design or workmanship or use of defective materials.
• Demolition, construction, structural alterations, or repair of any property or groundwork or excavations.

What causes of fire are not covered in Fire Insurance?

Fire Insurance does not cover the following causes of fire:

• Its own fermentation, natural heating, or spontaneous combustion.
• Undergoing any heating or drying process.
• Burning of property insured by order of any public authority.

What are exclusions under Fire Insurance?

Exclusions in Fire Insurance include:

• First 5% of each claim for “Act of God” perils and Rs. 10,000 for other perils.
• War, invasion, hostilities, civil war, rebellion, revolution, military power.
• Ionizing radiations or contamination by radioactivity.
• Pollution or contamination unless resulting from an insured peril.
• Loss or damage to specific high-value items.
• Electrical machine issues like short-circuiting, arcing, or electricity leakage.
• Theft during or after an insured peril, except under RSMD cover.
• Earthquake, volcanic eruption, or convulsions of nature unless covered as an add-on.

Under what circumstances does an existing fire insurance policy cease to be effective?

An existing fire policy ceases under the following circumstances:

• Fall or Displacement
• Change in Risk
• Unoccupancy
• Transfer of Interest

Is short Circuit Covered under Fire Insurance?

Yes, Fire Insurance covers damage caused by a short circuit, but it does not cover the specific electrical machine, apparatus, fixture, or fitting where the short circuit occurred.

Is cash burnt in a Fire Insurance Peril claimable under Fire Insurance?

No, cash burnt in a fire insurance peril is not claimable under Fire Insurance.

Is land covered under Fire Insurance?

No, land is not covered under Fire Insurance.

Are growing crops covered under Fire Insurance?

No, growing crops are not covered under Fire Insurance.

Is jewellery covered under Fire Insurance?

No, jewellery is not covered under Fire Insurance unless specifically stated in the policy.

Are residential flats covered under Fire Insurance?

Yes, residential flats are covered under Fire Insurance.

Are expenses incurred to control a fire or the damages caused by a fire covered under Fire Insurance?

Yes, expenses incurred to control a fire or mitigate damages are covered under Fire Insurance within the policy limits.

How is the premium for Fire Insurance calculated?

Premiums are based on factors such as location, construction type, occupancy, fire protection systems, and insured property value.

Can I get coverage for additional perils like earthquakes or floods?

Yes, additional coverage for perils like earthquakes or floods is available as policy add-ons.

Does Fire Insurance cover damage to personal belongings?

Yes, Fire Insurance generally covers personal belongings damaged by fire, but limits may apply.

Are temporary accommodation expenses covered if my home is uninhabitable?

Many policies include coverage for temporary living expenses if your home becomes uninhabitable due to fire damage.

What are common reasons fire insurance claims are denied?

Common reasons include non-payment of premiums, suspicion of arson, underinsurance, and policy exclusions.

How long does it take to settle a fire insurance claim?

The process can take from weeks to months, depending on claim complexity and documentation.

Is Fire Insurance mandatory?

No, but it is highly recommended. It may be required if a property is financed through a loan.