If you are a start-up, it is essential to buy a fire insurance policy that plays an imperative role by covering your business against various losses or damages. There are various factors that you should consider in order to choose the right kind of fire insurance policy.
Here are the important parameters which should be looked into –
- Kind of risk involved
- Type of property to be insured
- Content of the property
- Occupational hazards
- Exposure hazards
- Time element
Once you have understood the factors which you should consider if you are buying a fire insurance policy for your start-up, here are the kinds of fire insurance policies that you can consider –
Valued Policy –
Under this policy, you would have to decide the subject matter at the time of buying the policy. In case there would be any loss or damage, the fire insurance company would agree to pay a pre-decided amount. Usually, the policy is issued for goods or property whose value is difficult to compute after the loss or damage. Here, the goods can include paintings, works of art, etc.
Case: Rajiv started his own art gallery where he kept paintings and artwork of reputed painters. To secure his gallery, he bought a fire insurance policy. Here, the insurer issued him a valued fire insurance policy that covered paintings and artwork whose value was not easy to compute. In case of any loss due to fire, the insurer would pay the pre-defined amount.
Specific Policy –
If you are looking for a specific fire insurance policy for your start-up, the policy would cover the risk up to a specific sum only. In case of any fire loss or damage, the insurance company would pay the loss if it is lower than the specified amount.
Case: J.S Advertising is a digital start-up company. The company purchases the fire insurance cover of Rs 50,000 for the content whose value is Rs 90,000. If there is a loss of Rs 20,000 due to fire, J.S Advertising would be entitled to get the entire claim. If the loss is up to Rs 50,000, the fire insurance company will pay in full. In case, the loss is more than Rs 50,000, say it is Rs 80,000, the insurer would settle the claim up to the cover only.
Average Policy –
It is a clause that is added to a fire insurance policy to penalize those policyholders who have taken up a policy for a lesser amount than the cost of the property. In this case, the insurer will reduce the claim amount proportionally if the value of the fire insurance policy is lower than the property value.
Case: Vijay Saxena purchases a fire insurance policy for his software startup. He takes a fire insurance policy of Rs 50,000 when the value of the property is Rs 80,000. In case there would be a loss of property of Rs 1,00,000, the fire insurance company would pay the compensation on an average basis. Here, Vijay would not get Rs 50,000, as the insurer would make the payment on an average basis.
Floating Policy –
It is a policy that covers the goods lying at different locations. However, the goods should belong to the same person, and only one fire insurance policy would offer coverage to various warehouses. This floating policy is useful for those businesses, that have import and export businesses and their goods are lying in various warehouses at different locations.
Case: In one year, L.S Manufacturing has established a name for itself in the industry. Recently, the company has decided to purchase a floating fire insurance policy for its two warehouses, which are in Pune but at different locations. The premium is paid on an average basis accordingly.
Read More: Which Expenses Are Covered by The Fire Policy?
Comprehensive Policy –
Along with fire, the policy can be bought to cover perils like burglary, explosion, riots, lightning, etc. It is known as a comprehensive or an all-risk fire insurance policy.
Case: Raveena has started her small venture in artificial jewelry. To cover her business from all kinds of peril, she should go with a comprehensive fire insurance policy which will assure to give her coverage not from fire, but from other perils as well like lightning, explosion, etc.
Consequential Loss Policy –
A fire can hamper the functioning of the business. Production may go down, but fixed expenses continue to increase at the same rate. Here a consequential loss can help by covering the loss of profits.
Case: Unfortunately, Jeevash’s software company caught fire due to a short circuit in electrical switches. At that time, the company was working on a client’s project. The fire not only caused physical loss to its machinery, but Jeevash also had to shut down his company for ten days. The closure had a bad impact on the business. As Jeevash had a fire insurance policy that covered loss of profit as well, the insurer came forward and settled the loss of income after scrutinizing the situation.
Replacement Policy –
If fire insurance is bought with a replacement clause, the compensation will be given on the basis of replacement i.e., the compensation would be sufficient enough to buy the new asset.
Case: Considering the nature of the business, Mrinal Jain purchased a fire insurance policy for his engineering company with a replacement clause. It means, if a fire damages any of its plant & machinery, the insurer will cover the compensation which would be equivalent to purchasing the new machinery.
Read More: Which Perils Are Not Covered By Fire Insurance Policies?
If you are a start-up, it is essential to buy a fire insurance policy that plays an imperative role by covering your business against various losses or damages. There are various factors that you should consider in order to choose the right kind of fire insurance policy. Here are the important parameters which should be looked into –
- Kind of risk involved
- Type of property to be insured
- Content of the property
- Occupational hazards
- Exposure hazards
- Time element
- In Specific Fire Insurance Policy
Case: J.S Advertising is a digital start-up company. The company purchases the fire insurance cover of Rs 50,000 for the content whose value is Rs 90,000. If there is a loss of Rs 20,000 due to fire, J.S Advertising would be entitled to get the entire claim. If the loss is up to Rs 50,000, the fire insurance company will pay in full. In case, the loss is more than Rs 50,000, say it is Rs 80,000, the insurer would settle the claim up to the cover only.
