Any individual, firm, organization, or institution can apply for the fire insurance policy. Given below is a list of people or entities who should buy a fire insurance policy:
- Owners of buildings and the owners of the content inside the building which includes artifacts, furniture, etc.
- Educational Institutions
- Industrial or Manufacturing firms
- Godown keepers
- Boarding and Lodging
- Hospitals and Clinics
- Traders in stock
- Charitable Institutions, Trustees
- Transporters and C & F agents
- Financial Institutions
- Bailee, Lessor, Lessee, and Mortgagors and mortgagees.
The only need is that you have an insurable interest in the asset either in your custody or possession.
To know how to decide the sum insured under a fire insurance policy see How to decide the sum insured under a fire insurance policy?
Case on Who Should Buy Fire Insurance
Alex is an owner of a building and has leased it out to Adam who is the owner of an art gallery that operates in that building. So, while Alex has insured the building with a fire insurance policy, Adam owns the expensive artwork. To protect the valuable and expensive artifacts, Adam took a separate fire insurance policy. It includes third-party liability as well as a cover of the damage to personal assets.
This way both Alex and Adam ensure that their valuable assets would be under protection against unaware fire accidents. Similarly, Banks and financial institutions need to ensure the building and the content inside of the building for the safety and security of people and their assets.
M/S Vigyan Institute of Technology is a medium-sized engineering college situated on the outskirts of Delhi. However, the founder Kamal Pratap Sinha built the institute on donated land and operates under the M/S Vigyan Trust. Trustees at M/S Vigyan are mulling ways to lower the damage to the institutes’ building, equipment, and furniture.
They have finalized two following two actions to be taken:
- Provide a fire extinguishing system and install sprinklers
- Get fire insurance to cover the institute’s building and hostel
Similarly, the Hotel Sartaj built under finance by a leading hospitality firm has been covered under a fire policy by the financier. The benefit is, in case the hotel is destroyed and rendered uneconomical by accident, the financiers will be able to recover the loan without running after the borrower.
Aziz has opened a warehouse with 70% financing from an Infrastructure Bank. The bank bought a fire insurance policy to ensure the accidental damage to the structure can recover.
The bank also directed Aziz to ensure to take measures to avoid accidental fire damage and, extinguishers should be available at strategic locations to control any outbreak.
Such fire control systems will also enable the bank to get a discount on the fire insurance premium.
Fire Control System vs. Fire Insurance
Naina Commercial Center developed as the largest commercial center in the middle of the residential societies coming up in Surat. Naina is supposed to be a modern shopping complex with modern facilities and a helipad for direct connectivity for super-rich and VVIPs.
The owner of the center Ajit Dalal thinks that putting a modern fire extinguishing system in the building should be ample enough for them to avoid any fire mishaps, and therefore, feels that insurance will be an unnecessary expense.
He also advises the offices and tenants to keep fire extinguishing equipment to control a fire mishap. However, one fact he ignores is that the firefighting equipment needs to be manned 24×7 to be effective and that too the people should be able to detect the fire before it damages a lot of things.
Eventually, Ajit learned the importance of fire insurance the hard way. One night the fire started in one of the offices and burned through a false ceiling and spread to the offices on the floor above. Damaging material, furniture, documents, etc. worth more than Rs. 100,000.
Estimated the loss only of the material, the repair cost, and loss due to stalling of business activity could not accurately measure but certainly adds to the cost. However, this insurance policy could cover much of it.