What Are The Risks Covered Under Fire Insurance Coverage?

A fire insurance policy is basically a contract between the insurer and the buyer. In the contract the insurer promises to pay for the loss or damages caused to the property of the insurer for a specific period of time. The policyholder initially purchases the policy for a period of one year and can renew it annually. The risks covered under fire insurance coverage offers substantial financial relief to insured against the perils of fire.

Key Takeaways

• The Thermal Warping Exclusion: To validate a standard fire claim, assets must suffer damage from actual ignition or open flames; degradation or blistering caused strictly by high processing temperatures or industrial drying ovens is completely excluded.

• Choked Drain Inundation: Underwriters define a flood broadly, ensuring that water damage caused by local choked drains and abnormal accumulation is fully covered, alongside standard overflowing rivers or lakes.

• The Employee Impact Bar: While structural impact damage from third-party vehicles or animals is included, the policy systematically denies claims if a company employee causes the impact while acting in the course of their employment.

• The Industrial Boiler Split: Standard contracts fully exclude explosion or implosion damage occurring inside commercial steam boilers, economizers, or centrifugal vessels, requiring a separate Boiler & Pressure Plant Insurance Policy.

• Malicious Damage vs. Theft: The policy underwrites deliberate, malicious acts of vandalism, but enforces a rigid boundary that excludes losses from burglary, housebreaking, or larceny from being classified as malicious acts.

• Subsidence Quality Audits: Structural damage from land sinking is protected, but claims face immediate denial if forensic analysis links the collapse to defective design, poor workmanship, or substandard materials.

Fire insurance safeguards property against unpredictable perils, calculating the value of assets based on their market value.
The insured or anyone else, including government agencies, conducts missile testing operations that fall under the coverage. Fire insurance coverage includes mishaps caused due to lightning, accidental fire, explosion or implosion, etc., and also man-made perils like overflowing or bursting of water tanks and pipelines, leakages from water sprinklers, and so on. The fire tariff influences the premium costs, terms of coverage, and varied other conditions of the policy.

What is covered?

Fire insurance has wide range of inclusions and hence renamed as Standard Fire and Special Perils Policy  It covers the following risks-

Fire:

The policy provides cover against any kind of damage caused due to a fire-related accident; however, it does not cover for destruction or damages caused to the property insured by own fermentation, natural heating, or spontaneous combustion. Furthermore, one cannot consider damages to the property resulting from the heating and drying process as damage due to the fire. Moreover, the scope of coverage excludes the burning of property insured by order of any Public Authority.

Lightning:

Fire or any other damage caused by lightning is covered by this policy. For example, lighting can cause a fire or other sorts of damage like cracks in the building or broken roof which fire insurance will cover.

Explosion/ Implosion:

This policy covers fire damage caused due to explosions or implosions. This policy, however, does not cover destruction or damage caused to boilers (other than domestic boilers), economizers, or other vessels that produce steam and machinery or apparatus that uses centrifugal force to function. Boiler & Pressure Plant Insurance Policy will generally cover these risks.

Aircraft Damage:

Both fire and any other damage to the property caused directly by aircraft or any other aerial device also damages caused by articles dropped by Aircraft are covered in the fire policy. However, damages due to pressure waves caused by aircraft traveling at supersonic speed are excluded from the scope of the policy.

Riot, Strike, Malicious, and Terrorism:

The insurance policy covers loss or damages to the property resulting from a riot, strike, or terrorist activity (excluding war, invasion, mutiny, civil commotion, etc.). Also covered are losses or damage caused by the action of any lawful authorities in suppressing such disturbance or minimizing its consequences.

A malicious act includes a deliberate intention and plan of one or more individuals to do something unlawful to cause loss or damage to another’s property. However, fire insurance coverage excludes any loss by burglary, housebreaking, theft, or larceny and does not consider it a malicious act for the purpose of this cover.

Storms, Cyclones, Typhoons, Tempests, Hurricanes, Tornados, Flood, and Inundation:

Storms, cyclones, typhoons, Tempest, tornados, and hurricanes are all various types of violent natural disturbances that are accompanied by thunder or strong winds, or heavy rainfall. While flood and inundation occur when the water rises to an abnormal level. For the purpose of cover- Flood or inundation is considered as flood and inundation as per the insurance policy, not only in the common sense of the terms, i.e., flood in rivers or lakes, but also the accumulation of water due to choked drains.

Impact Damage:

Impact by a vehicle, an animal, or by an off-track rail to the property is covered, provided the vehicle or the animal should not belong to the owner of the property or any other occupier of the premise like tenants. Moreover, the impact caused by the vehicle by any of the employees while acting in the course of their employment is not covered. In this policy damages occurring to the boundary wall of insured property are also included.

Subsidence and Landslide including Rockslide:

Coverage is provided for the destruction or damage caused to the insured property by subsidence of even a small part of the site on which the property stands or landslide/rockslide. The policy excludes coverage for normal cracking, settlement, bedding down of new structures, and coastal or river erosion. Coverage does not include defective design, workmanship, or materials, as well as demolition, construction, alterations, or repairs for any property.

Bursting and/ or overflowing of Water Tanks, Apparatus, and Pipes:

The policy covers damages caused to the insured property by water or otherwise due to overflowing of water into the tanks. The damage may be due to accident or bursting of the water tanks, water pipes, or other apparatus like facility water purifiers.

Missile testing operations:

Coverage is provided for destruction or damage to the insured property due to impact or otherwise from trajectory/projectiles. Coverage includes missile testing operations conducted by the insured or by anyone else, including government agencies.

Leakage from Automatic Sprinkler Installations:

Coverage is provided for damages caused due to water leakage or accidental discharge by the automatic water sprinkler installed in the premises. However, the policy excludes damages caused by modification, repairs, or alterations . For example, the coverage does not include the extensions of the installation of the sprinkler and previously known defects in construction.

Bush Fire:

The fire insurance policy covers both accidental bush fires and other types of fires. The insured can file a claim for recovery under this policy if they set fire to overgrown bushes and plants. However, if this action leads to property damage, the policyholder can still make a claim for recovery. However, the policy excludes destruction or damage caused to the property due to the forest fire.

Other Risk coverage under Fire Insurance

Besides the above-mentioned perils, the risks covered under fire insurance coverage also benefit various office items. These include buildings, machinery, furniture, fixtures and fittings, electrical installations, stocks, stocks in trade including work in progress, etc. The coverage extends to belongings of any industry, offices, service occupancies, households, etc.

Moreover certain exclusions under the Standard Fire and Special Perils Insurance policy; can be opted for. To extend the risks covered under fire insurance coverage one can be opted as add-on covers or extensions including.

• Earthquake Fire and Shock.
• Spontaneous combustion.
• Removal of Debris (exceeding 1% of the claim amount).
• Architects, Surveyors, and Consulting Engineers fees (exceeding 3% of the claim amount).
• Spoilage Material Damage Cover.
• Leakage and Contamination Cover.
• Deterioration of stock in cold storage premises.
• Molten metal spillage Cover.
• Forest fire.
• Impact damage due to the Insured’s own Rail/Road vehicles.
• Omissions to insure additions, alterations, or extensions.
• Temporary removal of stock.
• Loss of rent.
• Startup expenses.

Summary Table: Underwriting Blueprint & Perils under an SFSP Contract

There are various exclusions under the policy, like all the above extensions (if not opted for). Additionally, the burning of property by order of any Public Authority comes under the exclusions. Also excluded are properties undergoing any heating or drying process, war or war-like operations, nuclear perils, and so on.

Frequently Asked Questions (FAQs)

1. What is a standard fire and special perils policy and how long is its term?

A) A standard fire and special perils policy is a specialized commercial property contract that protects an organization’s physical assets against unexpected financial losses caused by fire, natural disasters, and civil disturbances. The contract operates on a fixed timeline, initially purchased for a duration of one year, requiring annual renewals to maintain continuous risk coverage.

2. Are industrial steam boilers covered under a standard fire insurance explosion clause?

A) No, a standard fire insurance policy explicitly excludes explosion or implosion damage caused to commercial steam boilers, economizers, or apparatuses utilizing centrifugal force. Because these heavy industrial systems carry unique pressure risks, an enterprise must secure a specialized Boiler and Pressure Plant Insurance Policy to fully underwrite those operational assets.

3. Does fire insurance cover stock that catches fire on its own due to natural heating?

A) No, a baseline fire contract does not cover property destruction resulting from own fermentation, natural heating, or spontaneous combustion. If a business stores volatile agricultural products, coal, or chemicals prone to auto-ignition, they must explicitly purchase a spontaneous combustion add-on cover and pay an additional premium.

4. How does impact damage coverage apply to corporate boundary walls and fences?

A) Impact damage coverage underwrites structural repairs for a facility’s boundary walls and primary buildings if they are struck by an off-track rail car, vehicle, or animal. However, this coverage applies only if the vehicle or animal does not belong to the property owner, tenant, or occupier, and was not operated by an active employee during their shift.

5. Why are burglary and theft excluded under the malicious damage clause of a fire policy?

A) Insurers maintain strict underwriting boundaries between property damage and crime risks. While a fire policy covers malicious acts—defined as intentional, unlawful property damage or vandalism—it contractually excludes burglary, housebreaking, theft, and larceny, as these financial losses must be covered under a standalone burglary insurance policy.

6. Can a business claim compensation for building cracks caused by a lightning strike?

A) Yes, a standard fire and special perils policy fully underwrites both the fires caused by lightning and the direct physical damage left in its wake. If a severe lightning strike causes structural cracks in a building, breaks roofing infrastructure, or shatters electrical networks, the general insurer covers the reconstruction costs based on the asset’s verified market value.

About The Author

Shivani

MBA Insurance and Risk

She has a passion for property insurance and a wealth of experience in the field, Shivani has been a valuable contributor to SecureNow for the past six years. As a seasoned writer, they specialize in crafting insightful articles and engaging blogs that educate and inform readers about the intricacies of property insurance. She brings a unique blend of expertise and practical knowledge to their writing, drawing from her extensive background in the insurance industry. Having worked in various capacities within the sector, she deeply understands the challenges and opportunities facing property owners and insurers alike.