Fire and Engineering Insurance

Good businesses thrive on taking risk, on risks calculated to earning a profit. However, when it comes to protecting the business, no business owner should take risks. Buying sufficient insurance is prudent, even for small ventures. While needs would vary depending on type and scale of operation, there are some covers that are essential for all businesses.

There are 'package' policies for protecting businesses, offices, and shops, that provide comprehensive protection against various contingencies such as fire, burglary, personal accident, third-party liability, and so on. These plans are convenient as you insure various assets through a single plan.

There are also stand-alone policies sold by general insurers, wherein you choose to make a customised portfolio. If you have set-ups in multiple locations, some policies - such as the fire and burglary covers - offer a floater option, which means a single policy will suffice for all locations. These are annual plans and have to be renewed every year. There are also Engineering all risk/Construction all risk policies, that are tailor made for business in the construction/engineering/industrial sector. These policies cover all risks except those specifically excluded. They provide a wider scope of cover than your standard Fire package policy, although they are similar products.

Perilwise has a smart premium calculator with all of these products’ rates; which allows you to enter your details, and get an estimate of premiums.

Fire and allied perils

This plan is a basic cover against loss because of a fire, be it accidental or malicious damage. These policies also have inbuilt cover for damages caused by natural calamities such as riots, strikes, floods and storms. You can further customise and get cover for earthquakes and acts of terrorism. Further options include machinery breakdown, electronic equipment, and more. However, any loss resultant of gross negligence will not be reimbursed.

Protection should cover office premises, including the elevators, boundary walls and fences, and its contents, such as furniture and fittings, office equipment and electronics. Make sure to declare all expensive items stored, along with related documents, or the insurer will not be obliged to cover these.

Machinery Breakdown

A business can have machinery that breaks down due to usage, thus adversely affecting business. Machinery Breakdown insurance is offered as an additional cover to protect your main plant & machinery assets.

Business interruption and consequential losses

A fire can interrupt operations and consequentially affect profits. Therefore, general insurers also have a specific plan to protect your business from loss of profit as an extension of the fire insurance. These policies typically cover loss of gross profit (net profit plus standing charges) due to reduction in turnover or output, additional cost to avoid reduction in turnover and the auditor's fee. Some policies may also reimburse the rent for alternative space if the premises are unfit for occupation.

Burglary cover

A cover against theft and burglary is indispensable. Apart from loss of property, it also covers damage caused during a burglary or an attempted burglary. Exclusions include loss of jewellery, title deeds, business books (unless specifically insured), plate glass and items covered under a parallel policy, say, fire insurance and theft by family or employees and shoplifting. Basic burglary cover only kicks in if the thief breaks into your premises. Theft cover which is offered separately, covers you for loss even if there is no forcible entry.

In case of loss, the policy pays for the loss incurred depending on the sum insured. So, it is important that the sum insured be equal to the market value of all the items covered in order to be able to get the replacement cost of the items damaged or stolen.

Other addons

There are specific covers that insure money & valuables(amounts have to be declared), plate glass & neon signs(useful if you are a retail business), Electronic equipment(portable and non-portable covered separately); Debris removal & consultant fees, and more. Check out Fire premium calculator to understand more.

Engineering Policies

Also called Erection All Risk(EAR) and/or Construction All Risk(CAR), this insurance covers all types of risks involved in the erection of machinery, plant and steel structures of any kind, as well third-party claims in respect of property damage or bodily-injury arising in connection with the execution of an erection project.

Coverage is on an 'all-risks' basis which means it covers a wide range of benefits:

  • Fire, lightning, explosion, aircraft damage, riot, strike, malicious acts, flood, inundation, storm, cyclone and allied perils, landslide, subsidence, rockslide, burglary and theft. These are standard perils covered in most fire policies as well.
  • Faults in erection, human errors, negligence, short circuiting, arcing, excess voltage.
  • Electrical and mechanical breakdown.
  • Collapse, damage due to foreign objects, impact damages.
  • Any other sudden, unforeseen, accidental damages not explicitly excluded.
Major exclusions for the policy include:
  • Loss or damage due to faulty design, defective material of casting and/or bad workmanship.
  • Manufacturing defects.
  • Loss or damage due to wilful act or wilful negligence.
  • Consequential loss
  • Loss or damage due to war or warlike operations.
  • Loss or damage due to nuclear reaction, nuclear radiation or radioactive contamination
  • Losses due to normal wear and tear, gradual deterioration
  • Cessation of work
  • Inventory losses
This policy also has add-ons for additional benefits, such as:
  • Liability(Cross liability, Third party liability, Public liability)
  • Cost of removal of debris
  • Air freight, express freight, overtime charges, additional customs duty
  • Escalation
  • Owner's surrounding property
  • Storage risk at fabricator's premises
  • Maintenance cover

Industrial policies

Industrial All Risks Insurance is a wider cover than traditional “Standard Fire and Special Peril Insurance policy”. It is an all risk policy covering a wide range of perils such as fire and allied perils, burglary, accidental damage, breakdown as well as business interruption. There are, in general, 2 components to these policy.

  • Material Damage:
  • Covers accidental physical loss or damage (including machinery breakdown) to the property insured (other than excluded property) due to any cause (other than excluded causes).

  • Business Interruption:
  • It covers loss due to business interruption following a Physical loss or damage to the property covered under material damage section of the policy. Loss of Profits arising out of machinery breakdown is optional.

Add-ons offered:
  • Agreed Bank Clause
  • Architects, Surveyors and consulting engineers fees clause
  • Designation of Property Clause
  • Escalation Clause
  • Omission to insure additions, alterations & extensions clause
  • Temporary removal of stocks clause
  • Terrorism Cover

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