Property Insurance

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A fire insurance policy is a contract between the policyholder and the insurance company to indemnify the insured for the financial losses suffered due to the destruction or the damage of the property/goods caused by fire. All the movable and the immovable properties like buildings, plant & machinery, equipments & accessories, stocks, and other contents are covered by a standard fire insurance policy. Following are the 12 perils of the standard fire insurance policy:

1) Fire:

Damage caused to the insured property/goods due to fire is covered under a fire insurance policy. However, this policy will not cover the property/goods against:

  • Damage or destruction caused due to its own fermentation,
  • Damage or destruction caused due to natural heating
  • Damage or destruction caused due to spontaneous combustion.
  • Damage or destruction caused due to any heating or drying process.
  • Burning of the insured property due to orders issued by the Public Authority.

2) Lightning:

Fire or any other damage caused to the property due to a peril like lightning is covered by the fire insurance policy. Striking of a lightning can cause cracks in the building; such damage is also covered by this insurance policy.

3) Explosion/Implosion:

This policy protects against the loss caused due to explosion and implosion. A vessel can explode when its inside pressure reaches to or is more than the atmospheric pressure outside. Whereas, an implosion occurs when the external pressure is more than the internal pressure. Both these phenomena can result in a fire. However, the fire insurance policy does not cover the loss, destruction or the damage caused to:

  • Boilers
  • Economizers or other vessels
  • Machinery, apparatus or their contents generating steam

The policy also does not cover the damage or destruction caused by centrifugal forces.

4) Aircraft Damage:

It covers the loss or damage caused by Aircraft, other aerial or space devices.

5) Riot, Strike, Malicious Damage:

The fire insurance policy covers the loss, visible physical damage or destruction to the property caused by external violent means. Riot, strike and malicious damage are caused with an intention of causing disturbance to the public peace.

Read More: Type of useful covers you can add to your Fire Insurance Policy

6) Storm, Cyclone, Typhoon and Flood:

The violent destruction caused to the property or goods due to the above-mentioned perils are covered by the fire insurance policy. However, the policy does not cover for earthquake, volcanic eruption or other perils of nature under the standard peril list. The insured must ask the insurance company for an additional cover to get protection against the same.

7) Impact Damage:

Fire insurance policy covers against the damage or destruction caused to the insured property due to direct impact/contact by any rail/road vehicles or animals. However, it is important that such vehicles or animals are not owned by the insured, or any occupier of the premises or the employees in their course of their employment.

8) Subsidence and Landslide including Rock slide:

Subsidence means the sinking of the area on which the property is located, and landslide means the collapse of the mass of earth from a mountain or a cliff.

Fire insurance covers for the loss, destruction or damage directly caused by subsidence of part of the site on which the property stands or land slide and rock slide. However, it does not cover for damage or destruction caused to the property due to:

  • Demolition, repair, or structural alterations of the property or groundwork or excavations
  • Coastal or river erosion
  • Normal cracking or settlement of new structures
  • Settlement or movement of made up ground
  • Defective design or defective workmanship or use of defective materials

9) Bursting and/or overflowing of water tanks, Apparatus and Pipes:

This policy also covers for the loss or damage caused to the property by water due to the above-mentioned perils like bursting and/or overflowing of water tanks, apparatus and pipes.

Read More: What is Contribution in Fire Insurance?

10) Missile Testing Operations:

This policy also covers the damage or loss to the property due to any kind of missile testing operation.

11) Leakage from Automatic Sprinkler Installations:

Damage caused due to accidental discharge of water from a leaked automatic sprinkler installation is covered under this policy. However, it does not cover for the loss or damage caused due to:

  • Repairs of alterations to the buildings
  • Repairs, removal or extension of the sprinkler installation
  • Defects in construction which is already known to the Insured

12) Bush Fire:

The policy covers for the damage caused due to the burning of bushes and jungles by fire. However, it does not cover for any loss, destruction or damage caused by the forest fire.

Case Study:

A cloth manufacturer in Jaipur was into the business of exporting handcrafted finished goods to different parts of India. Once, a fire broke out in his factory and majority of the cloth which was to be exported was burnt.

Fire-brigade trucks rushed to the site immediately and took care of the fire. No one was injured. However, the fire caused huge damage to the property as well as the goods.

Since the owner of the cloth company had taken a fire insurance policy, he contacted his insurers immediately. The surveyor investigated the situation and reported that the fire was caused due to one of the 12 standard perils as mentioned in the policy.

As the fire occurred due to the insured peril, the insurer covered all the losses of the cloth manufacturing company.