Fire Insurance: 🔥 Meaning, Insurance Policy, Types, Features, Principles, Claim, Conditions.

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Contents
  1. What is a Fire Insurance Policy?
  2. What is the need for a Standard Fire and Special Perils Insurance Policy?
  3. What are the Perils covered under a Fire Insurance Policy?
  4. What are the Principles of a Fire Insurance Policy?
  5. Principle of Insurable Interest
  6. Principle of Utmost Good Faith
  7. Principle of Proximate Cause
  8. Principle of Indemnity
  9. Principle of Subrogation
  10. Principle of Contribution
  11. What are the Add-On Covers available in a Fire Insurance Policy?
  12. Types of Fire Insurance: What are they?
  13. Stock Declaration Policy
  14. Floater Policy
  15. Average Policy
  16. Agreed Value Policy
  17. What is Bharat Sookshma Udyam Suraksha Policy?
  18. What is Bharat Laghu Udyam Suraksha Policy?
  19. What can be Insured with a Fire Insurance (Standard Fire and Special Perils) Policy?
  20. How is the Premium calculated under a Fire Insurance Policy?
  21. How to fix Sum Insured under a Fire Insurance Policy?
  22. What are the Exclusions in a Fire Insurance Policy?
  23. How to Claim Fire Insurance?
  24. Get the Best Quotes for Fire Insurance Policy
  25. FAQS
  26. Testimonials

What is a Fire Insurance Policy?

A Fire Insurance Policy is a form of Property Insurance which provides reimbursement for damage to the insured assets because of fire and allied perils. A Fire Insurance Policy also known as Standard Fire & Special Perils Insurance Policy (SFSP Policy). A Fire Insurance Policy pays for the cost to replace or repair the damaged assets. A Fire Insurance Policy is thus essentially a form of Property Insurance which covers fire-related damage.

What is a Fire Insurance Policy?

What is the need for a Standard Fire and Special Perils Insurance Policy?

Fire Related Accidents have been all too common for Business Disasters. A small Short - Circuit or an Explosion has destroyed huge Factories and Buildings. Fire Damage can result in losses of Crores of Rupees. It can easily destroy years of savings and set your business back by years.

Moreover, after a Fire Incident, you would require substantial investments to resurrect your business. These Investments will be required precisely at a time when you are stretched for resources as your business has been destroyed by a Fire.

That is why it is always a wise idea to take a property insurance and insure your valuable assets with a Fire Insurance Policy.

What are the Perils covered under a Fire Insurance Policy?

A Fire Insurance Policy in India offers coverage against a range of perils apart from the basic cover against fire. The Fire Insurance coverages are as listed below:

  1. Fire
  2. Riots, Strikes and Malicious Damage
  3. Storm, Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood and Inundation
  4. Explosion /Implosion
  5. Lighting
  6. Impact Damage
  7. Subsidence, Landslides and Rockslides
  8. Bursting and/or Overflowing of Water Tanks, Apparatus and Pipes

You can read our blogpost on Fire Insurance Coverages to understand about the Perils Covered under a Fire Insurance Policy in detail.

What are the Principles of a Fire Insurance Policy?

A Fire Insurance Policy works on the following principles:

Principle of Insurable Interest

Insurable Interest means that a person benefits from the continued presence of the asset or is prejudiced by the loss of the subject-matter. Principle of Insurable Interest in a Fire Insurance Policy means that the Insured can insure only those assets which he benefits from. Insurable Interest must exist at the time of purchasing the fire insurance policy, during the currency of the policy as well as at the time of loss.

Principle of Utmost Good Faith

Uberrimae Fidei or Principle of Utmost Good Faith is another important principle of Fire Insurance and means that all parties to an Insurance Contract must make a complete declaration of all facts that are material for accepting or declining the Fire Insurance Proposal. The Insured has a duty to disclose all material facts and not conceal, misrepresent, or withhold any material facts which might change the decision of the insurance company to accept or reject the risk proposal.

Principle of Proximate Cause

Proximate Cause or Efficient Proximate Cause is the dominant risk factor in the chain of causation which has caused the loss. It need not be the initiating or last act in the chain of events. Proximate Cause needs to be identified when 2 or more causes are responsible for the loss. In that case, the Proximate Cause or the dominant factor which has caused the loss needs to be determined. If the Proximate Cause falls within the perils named in a Fire Insurance Policy, the claim is payable. If the Proximate Cause does not falls within the perils named in a Fire Insurance Policy or falls within the exclusions in a Fire Insurance Policy, the claim is repudiated.

Principle of Indemnity

The Principle of Indemnity in a Fire Insurance Policy aims to place the Insured in the same financial position after the loss as the Insured was in before the occurrence of the loss. As per the Principle of Indemnity, the Insured is not allowed to make a profit from his insurance policy.

Principle of Subrogation

Principle of Subrogation allows the Insurance Company to recover losses from a negligent third party after it has paid the losses to the Insured Party. The Principle of Subrogation places the Insurance Company in place of the Insured, allowing the Insurance Company to pursue all rights and remedies available to the Insured to recover his losses. Additionally, the Insurance Company is allowed to recover losses only after payment of the claim to the Insured, and any excess amount that the insurance company receives should be remitted back to the Insured.

Principle of Contribution

Principle of Contribution in a Fire Insurance Policy means that, if an Insured has the 2 or more policies covering the same subject-matter at the same time, then the Fire Insurance Company will pay the losses on a pro-rata basis in case of a claim. The Principle of Contribution prevents the policyholder from profiting from his insurance policy by insuring the same assets under multiple fire insurance policies.

What are the Add-On Covers available in a Fire Insurance Policy?

As part of a Standard Fire and Special Perils Insurance Policy, one can opt for Add-On Covers by paying additional premiums such as:

  1. Damages due to Earthquake
  2. Damages due to Storm, Tempest, Flood, Inundation, Hurricane, Cyclone, Typhoon and Tornado (STFI Cover)
  3. Damages due to Terrorism
  4. Removal Of Debris
  5. Architects and Surveyors Fees
  6. Spontaneous Combustion Cover
  7. Start-Up Expenses
  8. Omission to Insure Additions, Alterations or Extensions
  9. Escalation
  10. Forest Fire

You can read our blogpost on important add-on covers in fire insurance policy to understand about these add-on covers in detail.

Types of Fire Insurance: What are they?

There are different types of Fire Insurance Policies in India such as:

Stock Declaration Policy

A Stock Declaration Policy is issued when there are frequent changes in stock value during the currency of the policy. The Insured has to make monthly declarations of stock values to the fire insurance company under the Stock Declaration Policy.

Floater Policy

A Floater Insurance Policy is issued when the stocks are stored at different locations. The advantage of a Floater Policy is that the Insured has to declare only a single Sum Insured for stocks stored at all locations.

Average Policy

An Average Policy has an average clause attached to the Fire Insurance Policy and this clause comes into play when the Insured has underinsured the property by declaring a lower Sum Insured than the actual value of the property. In such a case, the Fire Insurance Company will only pay a pro-rata claim amount at the time of a claim.

Agreed Value Policy

Some assets are hard to value and, in such cases, the assets are insured under an Agreed Value Policy where the value of the goods to be insured is pre-decided and this is the value that the Insurance Company will be liable to pay if the Insured good is damaged or destroyed.

What is Bharat Sookshma Udyam Suraksha Policy?

A Bharat Sookshma Udyam Suraksha Policy, also referred to as BSUS Policy is a standard Fire Insurance Policy designed to cover SMEs and small businesses. The Bharat Sookshma Udyam Suraksha Policy can insure assets such as buildings, plant and machinery, furnitures and fixtures etc for loss or damage due to Fire, Explosion, Natural Calamities etc. Bharat Sookshma Udyam Suraksha Policy can be purchased only if the total value of insurable assets is less than or equal to Rs5 Crores.

What is Bharat Laghu Udyam Suraksha Policy?

A Bharat Laghu Udyam Suraksha Policy, also referred to as BLUS Policy is a standard Fire Insurance Policy designed to cover medium sized businesses who have insurable assets upto Rs50 Crores. The Bharat Laghu Udyam Suraksha Policy can insure assets such as buildings, plant and machinery, stocks etc. for loss or damage due to Fire, Explosion, Earthquake, Lightning, Storm, Floods etc. Bharat Laghu Udyam Suraksha Policy can be purchased only if the total value of insurable assets is between Rs5 Crores to Rs50 Crores.

What can be Insured with a Fire Insurance (Standard Fire and Special Perils) Policy?

All sorts of Assets can be Insured by taking a Standard Fire and a Special Perils Policy. Most commonly, a Fire Insurance Policy is taken out for the following types of Assets:

  1. Fire Insurance for Factories (Plant & Machinery)
  2. Fire Insurance for Residential or Commercial Property Building,
  3. Fire Insurance for Stocks and Inventory
  4. Fire Insurance for Furniture, Fixtures and Fittings etc
What can be Insured with a Fire Insurance (Standard Fire and Special Perils) Policy?
How is the Premium calculated under a Fire Insurance Policy?

How is the Premium calculated under a Fire Insurance Policy?

The Premium for a Standard Fire and Special Perils (Fire Insurance) Policy depends on the following factors:

  1. Sum Insured of the Property
  2. Perils to be Covered (Earthquake, STFI Cover)
  3. Risk Occupancy of the Property
  4. Location Details of the Property
  5. Add-On Covers Selected as part of the Fire Insurance Policy

How to fix Sum Insured under a Fire Insurance Policy?

There are 2 methods to calculate Sum Insured for a Fire Insurance Policy:

  • Reinstatement Value Method (RIV Method)
  • Market Value Method

Under the Reinstatement Value Method, the Insurance Company will pay the reinstatement cost of replacing the Damaged Property with a New Property in case of a Claim. This implies that Depreciation is not levied on the Property Value. RIV Method is applicable only to Fixed Assets and not to Stocks and Contents.

Under the Market Value Method, the Insurance Company pays the Market Value (Depreciated Value) of the Insured Property in case of a Claim. Here, Depreciation is levied on the Asset depending upon its age.

How to fix Sum Insured under a Fire Insurance Policy?

What are the Exclusions in a Fire Insurance Policy?

The following causes of losses are not covered under a Fire Insurance Policy:

Exclusions in a Fire Insurance Policy
Loss or Damages caused due to War or Related Perils Loss or Damages caused due to Nuclear Perils
Loss or Damages caused due to Pollution Loss or Damage to Stocks in Cold Storage Premises due to change in temperature
Loss or damage to any electrical machine due to Overrunning, Short-Circuiting, or Leakage of Electricity from whatever cause (Lighting included).

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.

How to Claim Fire Insurance?

Once the Insured Property has been damaged in a Fire, following documents would be required to make a Claim under a Fire Insurance Policy:

  • Claim Intimation in Writing or on E-mail
  • Policy Copy
  • Duly Filled and Signed Claim Form
  • Fire Brigade Report
  • Police Report
  • Forensic Report
  • Indian Meteorological Department Report in case of Weather Damages
How to Claim Fire Insurance?
Cover Factory and Buildings against Risk of Fire

Cover Factory and Buildings against Risk of Fire

Cover For Earthquakes and Floods

Cover For Earthquakes and Floods

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Risk Inspection Survey

Risk Inspection Survey

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Get the Best Quotes for Fire Insurance Policy

A Fire Insurance is an extremely important Property Insurance Policy to protect your assets. A small fire may result in losses of Crores of Rupees and may destroy a lifetime worth of savings. It may also result in financial distress and [Fire Loss of Profit Insurance](https://www.qian.co.in/fire-loss-of-profit-insurance/) can help you here.

Qian is a leading Insurance Broker for Fire Insurance Policies. The team of experts at Qian have wide experience in assisting clients across diverse industries for their Fire Insurance requirements.

Qian can assist you with Risk Inspection Surveys for your Property which would recommend the best practices so that the Fire Risk is minimised at your Property.

You can avail a FREE consultation for your Fire Insurance requirements with our experts who will assist you with a Comprehensive Cover as per your requirements.

If you wish to purchase a Fire Insurance Policy to secure your Property, reach out to us at support@qian.co.in or 📞 022-35134695 or fill this Contact Form. We will get back to you within 24 hours, guaranteed.

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FAQS

What is covered under a Fire Insurance Policy?

A Fire Insurance Policy Covers Damages on account of the following:

  • Fire
  • Riots, Strikes and Malicious Damage
  • Storm, Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood and Inundation
  • Explosion/Implosion
  • Lighting
  • Impact Damage
  • Subsidence, Landslides and Rockslides
  • Bursting and/ or Overflowing of Water Tanks, Apparatus and Pipes 
What are the Important Clauses in a Fire Insurance Policy?

Some Important Clauses in a Fire Insurance Policy are:

  • Agreed Bank Clause
  • Contract Price Insurance (for Imported Goods)
  • Reinstatement Value Clause
  • Designation of Property Clause
  • Local Authority Clause
What is the cost of Fire Insurance Policy?

The cost of Standard Fire and Special Perils Policy depends on the following factors:

  • Sum Insured of the Property
  • Risk Occupancy of the Property
  • Perils to be Covered
What types of Property can be insured with a Fire Insurance Policy?

Following types of property can be insured with a Standard Fire and Special Perils Policy:

  • Factories
  • Buildings
  • Homes
  • Offices, Shops

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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