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    What is Fire Insurance?

    The most popular Property Insurance cover in India is Fire Insurance. Although called Fire Insurance, the policy offers coverage against the operation of various specified perils under a single policy. The policy is technically named as Standard Fire and Special Perils Policy.

    A fire insurance policy can be offered to any sort of property such as residential dwellings, industrial occupancies, warehouses and non-industrial entities. Infrastructural utilities like roads, bridges, tank farms and the like can also be insured under this policy. Building structure, contents, furniture and fixtures, plant and machinery, electronic equipment, utilities and stocks can all be included under the policy for apt coverage.

    The policy offers coverage against the operation of following perils:





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    In addition to the above coverages, the following additional coverage can be opted for, by paying additional premium as applicable:

    • Earthquake (Fire and Shock)
    • Terrorism Cover
    • Impact Damage by insured’s own vehicles etc.
    • Spontaneous combustion
    • Architects, Surveyors and Consulting Engineers fees (in excess of 3% of claim amount)
    • Debris Removal (in excess of 1% of claim amount)
    • Omission to insure Additions, Alterations or Extensions
    • Deterioration of Stock in Cold Storage
    • Forest Fire
    • Spoilage Material Damage Cover
    • Leakage and Contamination Cover
    • Loss of Rent
    • Alternative Accommodation
    • Start Up Expenses

    Types of fire insurance policies

    Valued policy

    In a valued policy or agreed value policy, the sum insured of the property is not the market value but a value that is agreed upon by the insurer and the insured. It is issued for property for which the market value cannot be ascertained. For example, Curios (Ornaments), Works of Art, Manuscripts, and Obsolete machinery among others. In such cases, the insured may submit a valuation certificate for the property which, if found acceptable by the insurer, will be finalized as the sum insured on the policy.

    Floater policy

    This policy covers damage to stocks located at multiple places under a single sum insured. The insured, in this case, can take a single policy for all his goods spread across many locations.

    Declaration policy

    If the value of the stocks is constantly fluctuating, then there is a possibility that the stocks may be underinsured at the time of loss since the loss assessment is based on the market value of goods at the time of the loss. To avoid such a possibility, the insured may choose to take a declaration policy wherein he will be expected to declare the value of the stocks at different intervals, say monthly, during the entire policy period. The final premium is then calculated based on these declarations and excess premium, if any, will be refunded to the insured.

    Floater Declaration policy

    It is a combination of the floater policy and the declaration policy and can be taken if both the value and the location of the stocks belonging to the insured are fluctuating.

    Reinstatement or replacement policy

    This policy is given for buildings, machinery, furnitures and fixtures only, and not for stocks. In this policy, the insured is indemnified for the reinstatement or replacement of the property in case of damage. It provides full coverage since the compensation received is not based on the market value of the property but is the actual expense incurred by the policyholder for reinstating or replacing the property.

    Limit Of Indemnity Under Fire Insurance

    The limit of indemnity under this cover shall not exceed the Total Sum Insured given in the Policy Schedule. In respect of several insurance policies within the same compound/location with one or different insurers, the maximum aggregate loss payable per compound/location by any one or all insurers shall be the Policy Sum Insured. If the actual aggregate loss suffered at one compound/location is more than the Policy Sum Insured, the amounts payable under individual policies shall be reduced in proportion to the sum insured of the policies.

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    Excess Under Fire Insurance

    It is the first amount payable by the insured in the event of a loss, and is the uninsured portion of the loss. The Excess varies based on the location-wise sum insured as is applicable as stated below:

    • For locations having Sum insured upto Rs 10 Crs: 5% of claim amount subject to minimum of Rs 10,000/- for each and every claim
    • For locations having Sum insured above Rs 10 Crs and upto Rs 100 Crs: 5% of claim amount subject to minimum of Rs 25,000/- for each and every claim
    • For locations having Sum insured above Rs 100 Crs and upto Rs 1500 Crs: 5% of claim amount subject to minimum of Rs 5,00,000/- for each and every claim
    • For locations having Sum insured above Rs 1500 Crs and upto Rs 2500 Crs: 5% of claim amount subject to minimum of Rs 25,00,000/- for each and every claim
    • For locations having Sum insured above Rs 2500 Crs: 5% of claim amount subject to minimum of Rs 50,00,000/- for each and every claim

    On the happening of loss or damage to any of the property insured by this policy, the Insurance Company may

    • a) enter and take and keep possession of the building or premises where the loss or damage has happened.
    • b) take possession of or require to be delivered to it any property of the Insured in the building or on the premises at the time of the loss or damage.
    • c) keep possession of any such property and examine, sort, arrange, remove or otherwise deal with the same.
    • d) sell any such property or dispose of the same for account of whom it may Concern.
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    The powers conferred by this condition shall be exercisable by the Insurance Company at any time until notice in writing is given by the insured that he makes no claim under the policy, or if any claim is made, until such claim is finally determined or withdrawn, and the Insurance Company shall not by any act done in the exercise or purported exercise of its powers hereunder, incur any liability to the Insured or diminish its rights to rely upon any of the conditions of this policy in answer to any claim. If the insured or any person on his behalf shall not comply with the requirements of the Insurance Company or shall hinder or obstruct the Company, in the exercise of its powers hereunder, all benefits under this policy shall be forfeited. The Insured shall not in any case be entitled to abandon any property to the Insurance Company whether taken possession of by the Insurance Company or not. If the claim be in any respect fraudulent, or if any false declaration be made or used in support thereof or if any fraudulent means or devices are used by the Insured or any one acting on his behalf to obtain any benefit under the policy or if the loss or damage be occasioned by the wilful act, or with the connivance of the Insured, all benefits under this policy shall be forfeited.

    The Insured shall at the expense of the Insurance Company do and concur in doing, and permit to be done, all such acts and things as may be necessary or reasonably required by the Insurance Company for the purpose of enforcing any rights and remedies or of obtaining relief or indemnity from other parties to which the Insurance Company shall be or would become entitled or subrogated, upon its paying for or making good any loss or damage under this policy, whether such acts and things shall be or become necessary or required before or after his indemnification by the Insurance Company.

    If at the time of any loss or damage happening to any property insured under the SFSP Policy, if there be any other subsisting insurance or insurances, whether effected by the Insured or by any other person or persons covering the same property, the Insurance Company shall not be liable to pay or contribute more than its rateable proportion of such loss or damage.

    The Sum Insured shall stand reduced by the amount of loss in case the insured immediately on occurrence of the loss exercises his option not to reinstate the sum insured to its initial value.

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