Property Insurance

The most popular property insurance is the Standard Fire Insurance policy. The fire insurance policy offers protection against any unforeseen and unexpected loss or damage to/destruction of property due to fire or other perils covered under the policy. The different types of property that could be covered under a fire insurance policy are homes/dwellings, offices including IT/ITES Parks, shops and shopping malls, hospitals, places of worship, Housing societies, Hotels and Restaurants etc and their contents; industrial/manufacturing risks and contents such as machinery, plants, equipment and accessories; goods including raw material, material in process, semi-finished goods, finished goods, packing materials etc in factories, Godowns in the open; utilities located outside industrial/manufacturing risks; storage risks outside the compound of industrial risks etc.

One of the major value additions of fire insurance in general is coverage of belongings that are destroyed in a fire. This includes major appliances within the property and other items of value that are specifically named and covered within the terms of the fire insurance policy.
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History of Fire Insurance

History of Fire Insurance revolves around an Incident which shook, the entire world. The incident is about the fire in the city of London, which trashed the human race and infrastructure development in London. The Great Fire of London was a major conflagration that swept through the central parts of the English city of London, from Sunday, 2 September to Wednesday, 5 September 1666. It consumed 13,200 houses, 87 parish churches, St. Paul's Cathedral and most of the buildings of the City authorities. It is estimated to have destroyed the homes of 70,000 of the City's 80,000 inhabitants.

Fire Insurance in India

In India, Fire Insurance is governed by All India Fire Tariff issued by Tariff Advisory Committee. Popularly known as Fire Insurance, the Standard Fire & Special Perils (SFSP) Policy has evolved over many years and now covers 11 Allied Perils as well. The fire insurance policy offers protection against any unforeseen or unexpected loss or damage to destruction of property due to fire or other perils covered under the policy.

Apart from the risk of fire, it also offers cover against other Allied Perils listed under:
  • Lightning,
  • Explosion / Implosion,
  • Aircraft damage,
  • Riot, strike and malicious damage, (RSMD)
  • Storm , cyclone, typhoon, hurricane, flood and inundation (STFI)
  • Impact damage,
  • Subsidence and landslide including rockslide,
  • Bursting and/or overflowing of water tanks, apparatus and pipes,
  • Missile testing operations,
  • Accidental leakage from automatic sprinkler installations,
  • Bush fire

What Property Insurance to Buy?

Package or Umbrella policies
There are package or umbrella covers available which give, under a single document, a combination of covers. For instance there are covers such as Householders Policy, Shopkeepers Policy, Office Package policy etc that, under one policy, seek to cover various physical assets including buildings, contents etc. Such policies, apart from seeking to cover property may also include certain personal lines or liability covers

Fire Insurance
Thought it is called 'Fire Insurance', apart from the risk of fire, it also offers cover against lightning, explosion/implosion, aircraft damage, riot, strike and malicious damage, storm , cyclone, typhoon, hurricane, flood and inundation, impact damage, subsidence and landslide including rockslide, bursting and/or overflowing of water tanks, apparatus and pipes, missile testing operations, accidental leakage from automatic sprinkler installations, bush fire etc.

Burglary Insurance
The policy covers property contained in the premises including stocks/goods owned or held in trust if specifically covered. It also covers cash, valuables, securities kept in a locked safe or cash box in locked steel cupboard if you specifically request for it. A Burglary Insurance policy also covers damage to your house or premises caused by burglars during burglary or attempts at burglary.

All Risks Insurance
All Risks Insurance generally offers cover for jewellery and/or portable equipment etc. This cover is generally offered selectively. The design of the policy may vary from company to company.

What are the other types of property insurance available?

Some of the other property insurances available are engineering insurance policies like the Electronic Equipment Insurance, Machinery Breakdown insurance etc.

According to the IRDA, here are some recommended Do’s and Dont’s for buying Property insurance:

When you buy a property insurance policy you should:
  • Know you can insure only property you own and have an insurance interest in
  • Be sure you have the documents to prove ownership and value at the time of a claim
  • Give a complete and correct description, address and location of the property to be covered
  • Fixing the Sum Insured upfront and correctly. It can be
    • Market Value basis where depreciation is taken into account or
    • Reinstatement Value basis where the cost of replacement of the property is taken into account.
  • Don’t allow anyone else to fill your proposal form
  • Don’t conceal or misstate any facts about the property and its fixtures
  • Don’t misdeclare the value of your property and face disputes at the time of a claim

Frequently Asked Questions (FAQ’s)

The proposer of the policy should first and foremost have an insurable interest in the assets being proposed for insurance, i.e. the insured should stand to lose financially in the event of loss or damage to such assets. The proposal form should disclose all details, which are true to the insured’s best knowledge and other information, which the proposer may feel is relevant.

Generally, there are two methods. One is Market Value (MV) and the other is Reinstatement Value (RIV).
  • Market Value Method (MV) -In the event of a loss, depreciation is levied on the asset depending on its age. Under this method, the insured is not paid amount sufficient to buy the replacement.
  • Reinstatement Value Method (RIV) –here the Insurance Co. will pay the cost of replacement subject to ceiling of the overall Sum Insured. Under this method, no depreciation is levied. One condition is that the damaged asset should be repaired / replaced in order to get the claim. It may be noted that RIV method is allowed only for FIXED ASSETS and not for other assets like stocks and stocks in process.

Every insured is expected to behave as though he is uninsured. Take all precautions to prevent / aggravate the loss. Inform Insurance Company who have to be given an opportunity to inspect the damages. Inform fire brigade who will assist to put out the fire. During fire fighting, any damage caused to other insured property caused by water, will be paid by Insurance Company. Give completed claim form and documents as required by Insurer, in support of your claim. After repairs / replacement, submit bills to Insurer.

No. When you apply for a fire insurance policy, the current market value of the property or the Reinstatement value of the property, depending upon the basis of the Sum Insured, should be accurately calculated for arriving at the correct amount to be insured. The compensation payable when a covered loss or damage occurs shall be based on whether or not the property has been insured adequately. If the amount insured is excessive, it will mean overpayment of unnecessary premium; if the amount insured is inadequate you will receive amounts in proportion to the market value only.

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