What is Fire Insurance? Inclusions and Exclusions

Posted on Jan, 2021

Establishing a residential or a business property involves several costs. As a property owner, you need to ensure that you protect your tangible assets from a wide range of unpredictable incidents; fire-related outbreaks, for instance. Since no residential or business properties are resilient to fires, or for that matter, other natural disasters, the property owner can suffer a major set-back, in the absence of financial backing. Investing in a fire insurance policy helps you mitigate the financial damages caused due to fire. This article explains what is fire insurance. Also, find out inclusions and exclusions of fire insurance policies.

Fire insurance meaning and definition

A fire insurance policy is a type of property insurance policy, which covers the damages and losses caused to a residential or business property due to fire. This policy enables the policyholder to claim compensation for costs incurred towards repairing, replacing or reconstructing a property damaged in a fire. Since it is not possible to predict the estimation of losses due to a fire, insurance providers issue fixed value compensations when policyholders file claims. Therefore, you get the maximum sum assured when you file your claim for fire insurance.

What is included in fire insurance?

Having explained what is fire policy, let’s understand the type of coverage you can get when you file an insurance claim, along with its inclusions.

A fire insurance policy covers you against the losses arising due to an accidental fire, as per the policy’s terms and conditions. The coverage is limited to the value of the policy and not as per the extent of damage sustained by the policyholder. Typically, you can get coverage against:

  • The actual loss of goods caused by the fire
  • The loss of any adjacent property or building caused due to the fire in the insured property
  • Additional everyday expenses affected due to the damage endured by your property
  • Compensation amount paid to the firefighters
  • The fire triggered due to electricity issues
  • Damage caused due to overflowing pipes or water tanks.

Fire insurance exclusions

While you should read every insurance document carefully, you should pay special attention to a fire insurance plan as it includes several exclusions. They are as under:

  1. The first 5% of every claim, subject to a minimum of Rs. 10,000 for each loss arising due to “Act of God Perils” like lightning, storms, tempest, floods, typhoons, cyclones, landslides, rock slides, etc., as covered under the policy.
  2. The first Rs. 10,000 of every loss arising due to other perils, as indemnified by the policy. The excess amount is applied per insured, per event.
  3. Loss, damage, or destruction caused as a result of war and kindred perils like invasions, military revolutions, civil commotions or civil wars, rebellion, etc.
  4. Loss, damage, or destruction directly or indirectly caused to property insured, as a result of nuclear peril
  5. Loss, damage, or destruction caused to the property insured owing to pollution and contamination
  6. Loss, damage, or destruction caused to any electrical apparatus, machines, fitting or fixtures (excluding electrical wiring and fans) arising due to or occasioned by short circuits, over-running, excessive pressure, self-heating, electricity leakage, for any reason (including lightning).
  7. Loss due to delay, loss of earning, loss of market and other consequential or indirect damages or losses of any kind or disruptions whatsoever.
  8. Losses arising due to earthquake and volcanic eruptions are also part of Standard fire policy exclusions. That said, one can avail coverage against these natural phenomena by paying an additional premium, by opting for the earthquake (fire and shock) add-on rider.
  9. Loss, damage, or destruction caused due to terrorism activities, unless the policy holder opts for the terrorism cover add-on rider.
  10. Loss or damage caused due to spoilage resulting from the interruption, delay, or cessation of any operation or process, caused by the operation of any of the above-mentioned perils.
  11. Losses caused due to theft during or after an insured peril occurs, expect as provided under strikes, riots, malicious and terrorism damage covers.
  12. Losses or damages endured by the insured property, if removed to any place or building other than in which it is stated to be insured herein, except machinery and equipment removed temporarily for repairs, renovation, cleaning or other such purposes, for a period of up to 60 days.

Add on covers or riders you can buy with your fire insurance policy

Insurers can access their needs and risk exposure and purchase a wide range of covers with their fire insurance policy. They are as under

  1. Spontaneous combustion caused due to fire rider
  2. Earthquake (Fire and Shock) rider
  3. Forest Fire rider
  4. Impact damage caused by the insured’s own vehicle cover
  5. Stock deterioration in cold storage premises either due to accidental power failure or change in temperature add-on cover
  6. Architects, consulting engineers, and surveyors’ fees (exceeding 3% of the claim amount) add-on cover
  7. Debris removal (exceeding 1% of the claim amount) add-on rider
  8. Omission to insure, alterations, additions, or extensions add-on cover
  9. Spoilage material damage (only applicable to machinery and stock containers) cover
  10. Contamination and leakage cover
  11. Loss of rent cover
  12. Temporary removal of stocks cover
  13. Additional expenses of rent cover for a substitute accommodation cover
  14. Start-up Expenses add-on rider

Final note: It is impossible to anticipate a fire, and how destructive it can be. However, you can prepare for it by investing in a fire insurance policy. Fire insurance coverage provides a sense of security to your business, home, and other assets. It compensates you against your property’s value and assets damaged in a fire. Note that every insurance company has its own set of terms and conditions, but the general inclusions and exclusions are primarily the same. For more information on fire insurance plans, you can reach out to us at PINC Insurance.