What are the Coverages in a Fire Insurance Policy?

Fire damages have been extremely common since a long time. A Fire spreads instantaneously and can cause irreparable damage before it can be contained. Every year hundreds of homes and industrial sites are lost due to fire related accidents. It is more commonly seen in factories, where the slightest mishandling or carelessness or even a short circuit burn can destroy years’ worth of effort. Fire-related damages cost crores of rupees in losses which can set your business back by years. The investments required to revive a business are huge and are required at a time when you are already stretched for finances because your business is destroyed by the fire. It is at this stage that a Fire Insurance Policy is extremely useful as it will pay for material damage losses caused by a fire accident. It is thus important to understand all the Fire Insurance Coverages in detail.

What is a Fire Insurance Policy?

A Fire Insurance Policy, also known as a Standard Fire and Special Perils Insurance Policy, provides reimbursement for damage to the Insured Assets because of fire and allied perils. The Policy provides coverage against a range of perils such as Fire, Explosion/Implosion, Earthquake, Terrorism, Storm, Tempest, Floods Inundation (STFI Cover). Before comparing covered perils, readers should also understand the Principles of Fire Insurance Policy because claim payment still depends on insurable interest, indemnity, proximate cause, and contribution.

What does a Fire Insurance Policy Cover?

A Fire Insurance Policy offers coverage for numerous Perils apart from fire coverage. It is important to know the fire insurance coverage in detail so that you know what you are covered against.

Different Perils covered under a Standard Fire and Special Perils Insurance Policy are as follows. For a visual version of this same coverage list, see the guide to perils covered under Standard Fire and Special Perils Insurance Policy.

1. Fire Damages: The basic cover under a Fire Insurance Policy is the material damage caused by Fire. The Policy, however, excludes, damage caused to the Insured Property by
   • Its own fermentation, natural heating or spontaneous combustion
   • Its undergoing any heating or drying process
   • Burning of insured property by order of any Public Authority
2. Lightning: The Coverage in a Fire Insurance Policy also includes damage caused by Lightning
3. Explosion/Implosion: A Fire Insurance Policy will covers losses caused to Explosion/Implosion. However, it excludes losses or damage
   • To Boilers (other than Domestic Boilers), Economizers or other vessels, Machinery or Apparatus (in which steam is generated) or their contents resulting from their own explosion/implosion
   • Caused by Centrifugal Forces
4. Aircraft Damage: A Standard Fire and Special Perils Insurance Policy or SFSP Policy also covers loss, destruction or damage caused by Aircraft, other Aerial or Space Devices and articles dropped therefrom excluding those caused by pressure waves
5. Riots, Strikes and Malicious Damage Cover: A Fire Insurance Policy provides cover for Loss of or Visible Physical Damage caused to the Insured Property but it excludes damages caused by:
   • Total or Partial Cessation of Work or the Retardation or Interruption or cessation of any process or operations or omissions of any kind.
   • Permanent or Temporary Dispossession resulting from confiscation, commandeering, requisition or destruction by the Government’s order or any lawfully constituted authority
   • Permanent or Temporary Dispossession of any building or plant and machinery resulting from the unlawful occupation of any kind of any person of such building or plant or unit or machinery or prevention of access to the same.
   • Burglary, Housebreaking, Theft, Larceny or any such attempt or 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.
6. Impact Damage: A Fire Insurance Policy also covers Loss of or Visible Physical Damage or Destruction caused to the Insured Property due to the impact by any Road/Rail Vehicle or Animal by direct impact. Note that Fire Insurance Coverage will not cover Impact Damage by any vehicle or animal which is owned by the Insured. Impact Damage due to Insured’s own vehicle is covered as a separate add-on cover. Impact Damage is a very important cover in a Factory Insurance Policy.
7. Subsidence and Landslide including Rockslide: A Standard Fire and Special Perils Insurance Policy will cover loss or damage caused by Subsidence/Landslide/Rockslide of part of the site on which the property stands. The Insurance Policy will not cover losses or damage due to the following:
   • The normal cracking, settlement or bedding down of new structures
   • The settlement or movement of made up ground
   • Coastal or River Erosion
   • Defective design or workmanship or use of defective materials
8. Bursting and/or Overflowing of Water Tanks, Apparatus and Pipes
9. Missile Testing Operations
10. Leakage from Automatic Sprinkler Installations: A SFSP Policy also covers losses caused by leakage from automatic sprinkler installation. This Fire Insurance Coverage excludes losses or 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
11. Bush Fire: A Fire Insurance Policy also covers losses due to Bush Fire excluding Forest Fire (Forest Fire Coverage can be taken separately as an add-on cover as part of Standard Fire and Special Perils Insurance Policy)
12. Storm, Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood and Inundation (STFI Cover): A Fire Insurance Policy can also provide cover for losses caused due to Storms, Cyclones, Typhoons, Tempest, Hurricane, Tornado, Flood and Inundation if the Insured opts for the add-on cover of STFI Cover in Fire Insurance Policy.

The article above covers the Fire Insurance Policy Coverage in detail. Additionally, it is important to opt for the appropriate add-on covers in Fire Insurance Policy depending on the type of business and industry in which the Insured operates so that there is comprehensive cover. For broader asset-protection context, the property insurance policy hub explains how fire cover, home insurance, industrial all-risk, and related property covers fit together. You can read our detailed blogpost on Add-On Covers in a Fire Insurance Policy to understand about these add-on covers in detail. If the insured property is underinsured, the Average Clause in a Fire Insurance Policy can reduce the final claim amount even when the peril itself is covered.

Get Best Quotes for Fire Insurance Policy with Qian!

A Fire Insurance Policy pays the Insured for the Loss or Damage to plant and machinery and warehouse stocks which helps the Insured Party restart his business in case of fire damage. Additional Extensions like a Business Interruption Insurance Policy also pay for the Loss of Gross Profits faced by the Insured for the Time Period the Insured Business is interrupted. If you are interested in purchasing a Fire Insurance Policy, make sure to thoroughly read the exclusions in a Fire Insurance Policy in the Policy Wordings to avoid unwanted surprises later on. you are looking to purchase a Comprehensive Fire Insurance Policy for your business, please reach out to us via email at insurance@qian.co.in or call us on 022-35134695. We would be glad to assist you.