Unforeseen events, such as fires, floods or storms, can cause significant financial losses to businesses and property owners. To mitigate these risks, insurance solutions are available that provide financial protection against such uncertainties. One such cover is fire insurance, which is usually extended to include additional perils such as natural disasters, explosions and riots. Together, this wider protection is referred to as fire and perils insurance.
This article explains the meaning, importance, inclusions, exclusions and coverage aspects of fire and perils insurance.
Meaning of fire and perils insurance
Fire and perils insurance is a type of property insurance that safeguards businesses and individuals against damages caused by fire and other specified perils. The term ‘perils’ refers to unforeseen events that can result in property damage or destruction.
While fire is the core risk covered, the policy also extends to risks such as lightning, explosion, storm, flood, riot and earthquake, depending on the chosen cover. The aim is to help you manage financial risks arising from sudden events beyond your control.
Importance of fire and perils insurance for businesses
Businesses face constant exposure to risks, especially when operations involve physical assets like buildings, machinery or stock. Fire and perils insurance becomes essential for:
- Financial protection: It reduces the impact of financial losses by covering damages caused by fire or natural calamities.
- Business continuity: Insurance can help businesses recover faster after an incident, ensuring minimal disruption.
- Compliance needs: In some industries, holding such insurance is mandatory for regulatory or contractual obligations.
- Safeguarding investments: Businesses spend heavily on assets and insurance acts as a shield to protect this investment from sudden loss.
By managing risks proactively, companies can focus on growth rather than worrying about unforeseen events.
Who should buy fire and perils insurance?
Fire and perils insurance is not limited to large corporations. It is equally relevant to:
- Small and medium enterprises: For protecting shops, warehouses and offices.
- Large industries and factories: To cover machinery, raw materials and finished goods.
- Educational institutions and hospitals: To secure infrastructure and ensure safety.
- Households and residential complexes: For safeguarding personal property and housing societies.
Essentially, anyone who owns immovable property, valuable equipment or stock can benefit from this cover.
Inclusions under a standard fire insurance policy
A standard fire and perils insurance policy offers coverage in the following events:
- Fire, including bush-fire
- Lightning
- Storm, hurricane, typhoon, tornado or cyclone
- Riots and strike
- Automatic sprinkler leakages
- Landslides
- Bursting of apparatus and water tanks
- Aircraft damage
It also covers expenses incurred for removing debris, up to a specific percentage of the claim amount. The coverage also includes the surveyor’s fees up to a certain percentage of the claim.
Note: This is an indicate list. Read the policy wordings for a complete list of inclusions and exclusions.
Exclusions Under a Standard Fire and Perils Insurance Policy
A fire insurance policy has certain exclusions. These include:
- If there is no occupancy in the insured property for more than a month
- Damage caused due to natural heating, spontaneous combustion or fermentation
- Damage caused because of the building undergoing any heating or drying process
Also, certain perils are not covered under the plan. These include:
- Nuclear and its allied perils
- War and its allied perils
- Damages caused due to pollution or contamination
- Earthquake and volcanic eruption
Note: This is an indicate list. Read the policy wordings for a complete list of inclusions and exclusions.
Properties for which you will not get coverage
A fire and perils insurance plan doesn’t cover all properties. Exclusions generally include:
- Precious stones, drawings, manuscripts, books, cheques, paper money, coins, computer system records.
- Damage to electronic equipment arising from excess running, self-heating, leakage of electricity because of any reason.
It’s prudent to review your policy and inquire with your insurer about any properties that they will not cover. It is essential to prevent shocks later and avoid issues during the claims filing process.
Conclusion
Fire and perils insurance plays a critical role in safeguarding businesses and individuals from unexpected financial shocks caused by fire or other disasters. It is a form of property insurance that provides protection beyond just fire-related incidents.
By understanding its meaning, inclusions and exclusions, businesses and property owners can make informed decisions about securing their assets.
FAQs
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What is the difference between fire insurance and fire and perils insurance?
Fire insurance covers damages caused only by fire, while fire and perils insurance extends protection to additional risks such as floods, storms and earthquakes along with man-made perils, depending on the policy.
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Can homeowners buy fire and perils insurance?
Homeowners can purchase this cover to safeguard residential properties against fire and specified natural disasters.
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Are add-ons available under fire and perils insurance?
Add-ons may be available, but their availability depends on the insurer. It is best to review the policy wording or contact the insurer to confirm.
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Does the policy cover loss of profits due to fire?
Typically, fire and perils insurance does not cover consequential losses such as loss of profits. However, insurers may offer separate policies for such needs. It is advisable to review the terms and conditions carefully before making a decision.
Disclaimer: The information provided in this blog is for educational and informational purposes only. It is advised to verify the currency and relevance of the data and information before taking any major steps. Please read the sales brochure / policy wordings carefully for detailed information about on risk factors, terms, conditions and exclusions. ICICI Lombard is not liable for any inaccuracies or consequences resulting from the use of this outdated information.