Fire Insurance

Fire insurance is a type of insurance policy that provides cover to the policyholder for loss or damage caused by fire. Fire insurance comes as an add-on
cover that can be purchased by a homeowner insurance policyholder by paying an extra amount of premium.

What is Fire Insurance?

Fire insurance is a legal contract between an insurance company and the policyholder which guarantees that any loss or damages caused to the policyholder’s property in a fire will be paid by the insurance company. Fire insurance provides coverage against incidents of accidental fire, lightning, explosion, etc.

Why is Fire Insurance Important?

Fire accidents are unexpected and cause enormous destruction not only in terms of finances but it becomes tougher to deal with the aftermath. Owning a business, one is always prone to risks and a fire eruption can instantly bring a flourishing business to a stalemate. Let us understand why fire insurance is a wise choice. Having a fire insurance policy comes with a broad range of scope, which includes:

1. A fire insurance policy provides comprehensive protection against any damage caused due to fire explosion, caused due to either movable or immovable property.
2. A fire insurance policy encompasses damages to the properties, for instance, damage caused to an office building, furnishings, machinery, stock, etc. due to a fire-outbreak.
3. Besides, fire-related perils, a fire insurance policy also encompasses damages caused due to any natural calamity, explosion, the bursting of the water tank, etc

Scope of Fire Insurance: Case

After serving seven years in the corporate sector, Malini started her own fashion house, with a manpower of 25. Soon after her business picking up its pace, a sudden incident left her shellshocked. A fire erupted at her neighborhood shop and half of the property was damaged, incurring huge financial damages. The shop owner hadn’t insured his property, hence he had to bear the entire loss by himself.
Malini, taking a lesson from this event, decided to purchase fire insurance to protect her fashion house from any unforeseen events like this. Initially, finance was a constraint for her and she had to purchase old machinery and furniture. Being skeptical about whether her fire insurance covers these expenses or not, she contacted the insurer. She breathed a sigh of relief when the insurer confirmed that the scope of fire insurance covers old machinery and furniture as well.

Types of Fire Insurance in India

On the premise of the necessities, the following types of fire insurance policy can be availed, which are:

•  Specific Policy: Under this policy, for a certain property, a specified sum insured is determined and in case of any loss, the compensation will be provided for the loss provided it is less than the determined amount.

• Comprehensive Policy: This policy provides extensive coverage not only against fire-related perils but also provides coverage against any other perils, such as robbery, burglary, civil rampage, etc.

• Valued Policy: At the initiation of the policy, the value of a particular property is determined. On the premise of the value of the property, the insurance of the policy is decided wherein the insurer will pay the value in the case of destruction of property by fire.

• Floating Policy: This type of policy is best suited for owners who run a business of import and export. This policy will provide you with coverage securing your goods lying at various places. It is to be noted that the goods need to belong to the same individual under one sum assured and one premium covering all the perils related to the goods.

• Consequential Loss Policy: A fire-outbreak in a workplace like in a factory may disrupt the workforce that is production might go down but the fixed expenses continue at the same price. This policy essentially provides coverage for consequential loss or loss of profits. On the premise of loss of sales, the loss of gains is calculated.

• Replacement Policy: In this policy, the insurance provider assures compensation for the loss of the premise of the property’s market value. After contemplating the depreciating value o the property, the amount that is to be compensated is calculated. The compensation provided will be at the replacement price, which implies that the new asset will be of the price that has been lost. It is to be noted that there will not be any additional expense as the compensation provided will be on the new asset’s market price.

Eligibility Criteria to Buy Fire Insurance Policy

If you wish to buy a fire insurance policy, the following is the criteria:

•  Any person/organisation/institution/firm that may endure or need to ensure his/her business from an unforeseen misfortune in case of a fire.
•  Anyone who possesses a building, furniture, household articles and so on.
•  Retailers or shopkeepers, godown keepers.
•  Banks, financial, education, research institutes, and so on.
•  Service suppliers including hotel owners, medical clinics, lodging, clinics and so on.
•  Manufacturing and industrial firms, transporters.

Add-on Coverage in Fire Insurance

Upon the payment of an additional premium, the insured can benefit the following add-on coverage:

•  Earthquake
•  Wreckage removal
•  Forest fire
•  Loss of rent
•  Start-up cost
•  Alternate accommodation
•  Unconstrained burning
•  Damage to stock due to change of temperature
•  Leakage and contamination cover
•  Architect, engineers, Surveyors consultation fee
•  Cover for molten metal spillage
•  Impact loss owing to insured’s own road/rail transit

Documents Required to File Fire Insurance Claim

The following is the list of common documents, which will be required while filling any claim related to fire insurance:

•  An authorised copy of the policy, which includes the schedule and clauses.
•  The complete duly filled claim form.
•   In case, if the incident is published a proof to substantiate the same such as a Newspaper proof.
•   Records of previous claims, if any.
•   Photographs
•   Report by the fire brigade.
•   Forensic report wherever is needed.
•   A copy of the final investigation report