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Contents
  1. What is Industrial All Risk Insurance?
  2. What is an Industrial All Risk Insurance Policy?
  3. What are the coverages in an Industrial All Risk Insurance Policy?
  4. What is the Sum Insured under the Material Damage Section of an Industrial All Risk Insurance Policy?
  5. What is the Sum Insured under the Business Interruption Section of IAR Policy?
  6. What are the Add-On Covers under the Material Damage Section of an Industrial All Risk Insurance Policy?
  7. What are the Add-On Covers under the Business Interruption Section of an Industrial All Risk Insurance Policy?
  8. What are the Exclusions under the Material Damage Section of an IAR Policy?
  9. What is the basis of Loss Settlement under the Material Damage Section of IAR Policy?
  10. Get a FREE Quote for Industrial All Risk Insurance Policy
  11. Testimonials

Industrial All Risk Insurance Policy?

Factory Owners invest hundreds of crores of rupees in plant and machinery, raw materials, finished goods, buildings and warehouses. With such huge investments being made, factory owners should make every effort to secure these investments from the multitude of risks that they are exposed to.

Fire-Related Accidents can cause huge damage and set back a business back by years. The damages could be to the tune of crores of rupees and can also push the company into bankruptcy.

An Industrial All Risk Insurance Policy also known as an IAR Insurance Policy is an excellent tool for big businesses to protect themselves from fire related damage and the consequent business interruption losses faced by the business
Industrial All Risk Insurance Policy

What is an Industrial All Risk Insurance Policy?

An Industrial All Risk Insurance Policy (IAR Insurance Policy) is a comprehensive package policy which provides Insurance Protection against a wide variety of risks face by an industry or factory during its operation. It offers coverage against a wide range of Perils such as Fire, Theft, Burglary, Machinery Breakdown and Business Interruption.

An Industrial All Risks Insurance Policy offers much wider coverage than a traditional Fire Insurance Policy and hence it is preferred by large factories and industries.

What are the coverages in an Industrial All Risk Insurance Policy?

An Industrial All Risk Insurance Policy has 2 Sections:

1. Material Damage Section: The material damage section of the IAR Insurance Policy provides coverage against any material damage event to the Insured Property during the Policy Period. It provides coverage for Fire Damage Event (same coverages as a Fire Insurance Policy) and Machinery Breakdown Event. 

Machinery Breakdown (MBD) Section under Industrial All Risk includes not only your conventional Machinery Breakdown, that is, electrical breakdown or mechanical breakdown, but it also includes your Electronic Breakdown (Electronic Equipment Insurance Policy) and Boiler explosion (Boiler Pressure Plant Policy).

Additionally, Theft and Burglary are Inbuilt covers in an IAR Policy, and Transit Risk within the Premises is also covered under an IAR Policy. These are big advantages of an IAR Policy over a SFSP Insurance Policy

So, the Material Damage Section of an Industrial All Risk Insurance Policy is a combination of Fire Insurance Policy, Machinery Breakdown Insurance Policy, Electronic Equipment Insurance Policy, Boiler and Pressure Plant Insurance Policy, and Theft and Burglary Insurance Policy.

2. Business Interruption Section: The Business Interruption Section of IAR Policy covers the loss of gross profits faced by the business due to business interruption because of a material damage event faced by the Insured Property.

The Business Interruption Section of the IAR Policy covers both forms of business interruption: Business Interruption arising out of Fire Damage (Fire Loss of Profits) and Business Interruption arising out of Machinery Breakdown (Machinery Loss of Profits). Fire Loss of Profit Insurance is mandatory while Machinery Loss of Profit Insurance is optional under the Industrial All Risk Insurance Policy.

What is the Sum Insured under the Material Damage Section of an Industrial All Risk Insurance Policy?

The Sum Insured under an Industrial All Risk Insurance Policy for Fixed Assets like Plant and Machinery, Buildings, Furniture, Fixtures and Fittings, Electrical Installations must be declared on Reinstatement Value Basis (RIV Basis).

There is no provision to declare Sum Insured on a Market Value Basis unlike in a Standard Fire and Special Perils Insurance Policy. In a normal Fire Insurance Policy, we can cover fixed assets like Plant & Machinery, Buildings, Furniture, Fixtures and Fittings on a Market Value Basis (MV Basis) and save premium.

However, Inventory Stocks like Raw Materials, Work in Progress and Finished Goods are covered on Market Value Basis in an Industrial All Risk Insurance Policy in same way as in a Fire Insurance Policy.

The minimum Sum Insured required for Material Damage under an Industrial All Risk Insurance Policy is Rs100 Crores although some insurance companies offer IAR Insurance Policies for a Sum Insured of even less than Rs100 Crores.

The Minimum Material Damage Sum Insured limit of Rs100 Crores can be for 1 or more location. It means that if the Insured has 4 locations, an Industrial All Risk Policy does not need to have a Sum Insured of Rs100 Crores for only one location. Even if the sum total of all 4 locations put together is Rs100 Crores, then also the Insured Party is eligible to avail an Industrial All Risk Policy.

What is the Sum Insured under the Business Interruption Section of IAR Policy?

The Business Interruption Section of the IAR Policy constitutes Fire Loss of Profit and Machinery Loss of Profit. Fire Loss of Profit is compulsory while Machinery Loss of Profit is optional.

The Sum Insured for the Business Interruption Section (Fire Loss of Profit and Machinery Loss of Profit) represents the Annual Gross Profit of the Company. The Minimum Indemnity Period under the Business Interruption Section of the IAR Policy is 12 months.

What are the Add-On Covers under the Material Damage Section of an Industrial All Risk Insurance Policy?

The add-on covers under the Material Damage Section of an Industrial All Risk Insurance Policy are very similar to add-on covers in a Fire Insurance Policy:

  • Removal of Debris including of Foreign Debris Add-On Cover
  • Architects, Surveyors and Consulting Engineers Fees
  • Spoilage Material Damage Cover
  • Minor Works Extension
  • Omission to insure additions, alterations & extensions clause
  • Escalation Clause
  • Deterioration of Stocks in Cold Storage Premises due to Accidental Power Failure at the Premises of Power Supply Station
  • Deterioration of Stocks in Cold Storage Premises due to Change in Temperature by Damage to Cold Storage Machinery
  • Waiver of Underinsurance
  • Designation of Property Clause
  • Temporary removal of stocks clause
  • Group interdependency Cover
  • Lake Outburst Cover
  • OEM Parts Add-On Cover
  • Obsolete Spare Parts Cover.
  • Terrorism Cover
  • Earthquake Cover

The above list of add-on covers is not exhaustive. There are many more add-on covers that can be included in an IAR Insurance Policy.

What are the Add-On Covers under the Material Damage Section of an Industrial All Risk Insurance Policy?
What are the Add-On Covers under the Business Interruption Section of an Industrial All Risk Insurance Policy?

What are the Add-On Covers under the Business Interruption Section of an Industrial All Risk Insurance Policy?

The Add-On Covers under the Business Interruption Section of IAR Policy are as follows:

  • Failure of Gas Supply
  • Failure of Water Supply
  • Failure of Electricity Supply
  • Customers Premises Extension
  • Suppliers Premises Extension
  • Prevention of Access Cover
  • Additional Increased Cost of Working

What are the Exclusions under the Material Damage Section of an IAR Policy?

There are 2 types of Exclusions under an IAR Policy: Excluded Causes and Excluded Property. They Excluded Causes and Excluded Property under an IAR Policy are listed below:

Exclusions in a Industrial All Risk Insurance Policy
Excluded Causes Excluded Property
Loss or damage to property due to faulty or defective design materials or workmanship, inherent vice, latent defect, gradual deterioration, deformation or distortion or wear and tear Property undergoing testing, installation including material unless damaged by a cause not excluded in the policy ensues & then the insurer shall be liable only for such ensuing loss
Interruption of the water supply, gas, electricity or fuel systems or failure of the effluent disposal systems to and fro from the premises Property in the course of Demolition, Construction or Erection
Larceny, Acts of Fraud, Dishonesty Money, Cheque and Other Valuable documents unless specifically mentioned in the Policy
Coastal or River Erosion or Normal Settling or Bedding Down of New Structures Goods Held In Trust or Commission unless specifically mentioned in the Policy
Damage due to Cessation of Work or Loss of Market Livestock, Growing Crops or Trees
Loss or Damage due to Wilful Act/ Negligence by the Insured or a Person acting on Insured’s behalf Property more specifically insured elsewhere

You can Insure your valuable assets with a Standard Fire and a Special Perils Insurance Policy. This Policy ensures that you emerge unscathed should a Fire Damage occur.

What is the basis of Loss Settlement under the Material Damage Section of IAR Policy?

In case of a claim, an Industrial All Risk Insurance Policy will pay for the reinstatement or replacement of the property which has been damaged or destroyed as on the date of actual reinstatement provided that the work of reinstatement is commenced and carried out within a period of 12 months after the loss.

If the reinstatement takes more than 12 months, the Insured stands to lose all the benefits of the IAR Insurance Policy and the Claim will be settled on Indemnity Basis.

Get a FREE Quote for Industrial All Risk Insurance Policy

Qian is an experienced insurance broker for Industrial All Risk Insurance Policy. An Industrial All Risk Insurance Policy is a complicated insurance with lots of coverages and clauses and hence, you should take the assistance of an Insurance Broker who is aware of the nuances of the IAR Policy.

Call us NOW for a FREE Quote for your IAR Policy at 📞 022-35134695 or Email us at support@qian.co.in

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Testimonials

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Hemik of Qian is knowledgable, prompt and very professional - highly recommended. I had to claim for a critical illness under my health insurance policy and Qian’s assistance with the claims process and advice on how to deal with the insurer was invaluable.

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