A fire insurance policy covers all properties— moveable or immovable, against various perils. The fire insurance policy has been renamed as the standard fire and special perils policy.

Some of the properties that are covered under the policy are:

  1. Building:
  • Both under construction and completed projects
  • Interiors, partitions, and electrical
  1. Plant & Machinery, equipments and accessories
  • Both new and second-hand
  • Obsolete machinery
  1. Some other contents which are covered are cables, pipelines, furniture, fixture, household goods, etc.

Here are the risks covered under a fire insurance policy:

  • Fire: Destruction or damage caused to the insured property due to natural heating, fermentation or spontaneous combustion or when it is undergoing any heating or drying process can’t be treated under damage to fire. For instance, if paints or chemicals are kept in a factory, and they catch fire while undergoing heat treatment; the same will not be covered under the policy. Similarly, if any public authority orders the burning of insured property, then also it will be excluded from the policy.
  • Lightning: The impact of lightning can result in fire or any other kind of damage, like cracks in a building due to a lightning strike, etc. Both fire and other damages caused by lightning are covered under this peril.
  • Explosion/Implosion: Explosion means sudden, violent burst with a loud voice. An explosion occurs when the pressure within the vessel reaches to the atmospheric pressure. The impact of the explosion can also lead to fire damage. On the other hand, implosion means bursting inward. It usually happens when the external pressure is more than the internal pressure.
  • Aircraft Damage: It includes loss or damage caused to the property directly by aircraft and aerial devices.
  • Riot, Strike, and Terrorism Damage: When a person acts with others to disturb the public peace, (other than war or invasion) it is called a riot, strike or terrorist activity. Any loss or damage caused to the insured property by any such activity or by the action of any lawful authority in suppressing such disturbances or minimizing consequences is covered. Though terrorism is excluded from most of the policies, it can be added as an extension by paying an extra premium.
  • Storm, cyclone, typhoon, and flood: These are all types of violent natural disturbances which can cause damages to your property and therefore, they are covered.
  • Impact Damage: Any damage caused to the insured property when it comes in direct contact with rail/road vehicle or animal is covered. However, such vehicles or animals should not belong to the insured in any way.
  • Subsidence and Landslide including Rockslide: While subsidence occurs when the land or building sinks to a lower level, landslide usually occurs on a hill when the landslides down. Any damage or destruction caused to the insured property due to subsidence and landslide is covered. However, normal cracking, defective design, and destruction due to the use of defective materials are not covered.
  • Bursting and/or overflowing of water tanks, Apparatus and Pipes: Loss or damage caused to the insured property by water on account of bursting or overflowing of water tanks and pipes is insured.
  • Missile Testing Operations: Any damage caused due to missile testing operations is covered.
  • Leakage from Automatic Sprinkler Installations: Any damage caused to the insured place when water accidently discharged or leaked out from automatic sprinkler installations is covered.
  • Bushfire: It covers damages caused due to burning, whether accidental or otherwise, of bushes and jungles and the cleaning of lands by fire. However, it doesn’t include damages caused by a forest fire.

Case study

Rajesh Mishra was the owner of a garment showroom in a commercial area of Mumbai. The showroom stocked all trendy and designer clothes for the complete family. It was the day before Diwali in 2015 when the fire suddenly erupted at his showroom and spread so quickly that it engulfed everything, including the stock which had to be delivered to a foreign client, before anybody could do anything to stop it. Two fire brigades took around three hours to extinguish the fire. Thankfully, no one was hurt physically, but the fire damaged both the building and content.  Luckily, three years ago when Rajesh started his business, he bought a fire insurance policy. He approached his insurer who sent a surveyor to ascertain the cause and calculate total losses. Once the surveyor submitted his report, the insurer disbursed the claim amount in a few days.  As the fire occurred due to the insured peril, the insurer covered all the losses. The policy curtailed business losses to a great extent and helped Rajesh to survive a financial loss.