Add Ons in Fire Insurance

1. Add-On Covers
on STANDARD FIRE AND SPECIAL PERILS
POLICY
PRESENTED BY:-
SANTHOSH YADAV DAGGULA
SAUMYA SAJIB
SHEFALI
SHADDHA RATHORE
SIMRANJEET KAUR

2. Definition
• Add on covers are extensions of the fire policy on
payment of additional premium and by attachment of
endorsements. These extensions relate to additional
perils or coverages.
• These are mainly of two types
 Perils
Expenses

3. Why Add-ons ???
3
• Increase ticket size ~
increase commission
• Increase loyalty, easy
renewals and increase in
customer retention YOY
• Overall development of all
sectors related to
insurance like
Manufacturers, Garages,
Surveyors, Assistance
service providers, medical
service providers, IT
solutions etc…
• Increase ticket size, increase
top line
• Flexibility to differentiate its
product from competitors
• Increase profitability
• Increase loyalty/ renewal
and customer base
• Address specific customer
needs
• Flexibility to customer to
add value to existing
coverage
• Complete coverage ~ less
hidden out-of-pocket
expenses
• Lifestyle & convenience
with Security
Customer
Insurance
company
Agent &
IMDs
Other
Third
parties

4. General Add on covers include Loss/ damage/ destruction of the property caused
by
Perils
1. Deterioration of Stocks in Cold Storage premises due to power failure following
damage due to an insured peril
2. Forest Fire
3. Impact Damage due to Insured's own Vehicles, Fork lifts and the like and
articles dropped there from
4. Spontaneous Combustion
5. Omission to insure additions, alterations or extensions
6. Earthquake (Fire and Shock)
7. Spoilage material damage cover.

5. 8. Leakage and contamination cover.
9. Temporary removal of stocks.
10. Terrorism
Expenses:
1. Architects , Surveyors and Consulting Engineer's Fees (in excess of 3% claim
amount)
2. Debris Removal (in excess of 1% of claim amount)
3. Loss of rent.
4. Insurance of additional expenses of rent for alternative accommodation.
5. Start up Expenses

6. 1. Deterioration of Stocks in Cold Storage premises due to
power failure following damage due to an insured peril
• Special Exclusions
1). The Company shall not be liable for any loss
unless the duration of each such failure
exceeds 24 hours
2). The Company shall not be liable for any
loss occasioned by the deliberate act of the
Government, Municipal or Local Authority
or Supply Authority not performed for the
sole purpose of safeguarding life or
protecting any part of the supply.
• In any action, suit or other proceedings
where the company alleges that reason of
this condition any loss or damage is not
covered by this insurance, the burden of
proving that this loss or damage is covered
shall be upon the Insured.
Deterioration
of Stocks in
Cold Storage
premises due
to accidental
power failure
consequent to
damage at the
premises of
Power Station
due to an
insured peril
25%
of
Poli
cy
Rate
Sum
insure
d of
stocks

7. 2. Forest Fire
The fire policy covers bush fire
but excludes forest fire. The
extension includes loss or damage
to the property insured directly
caused by burning, whether
accidental or otherwise, of forest
, jungles and clearing of lands by
fire.
The
premiu
m rate is
Rs.5 per
mille
Sum
insured of
stocks

8. 3.Impact Damage due to insured own vehicle, fork
lift and like article.
Impact Damage
due to Insured’s
own Rail/Road
Vehicles, Fork lifts,
Cranes, Stackers
and/or caused by
articles dropped
therefrom.
5% of Policy Rate Policy Sum
Insured

9. 4. Spontaneous Combustion
• Combustion- a chemical process in which a
substance reacts rapidly with oxygen and gives off
heat. The original substance is called the fuel which
can be a solid, liquid, or gas.
• Own fermentation, natural heating and
spontaneous combustion are covered in this add on
cover.
• The expression “by fire only” in the endorsement
above must not be omitted under any
circumstances
Spontaneous
Combustion
Category I goods
Category II goods
Category III goods
Category IV
goods
Rates
applicable
Rs.0.25%o
Rs.0.50%o
Rs.0.75%o
Rs.1.00%o
Sum
insured of
relative
commodit
y

10. 5. Omission to insure additions, alterations or
extensions
• The Insurance by this Policy extends to cover Buildings
and/or Machinery, Plant hereof which the insured may
erect or acquire or for which they may become responsible
:-
a) at the within described premises
b) for use as factories
Omission to
Insure additions,
alteration or
extensions.
5% of sum insured
of BMA
Policy Rate

11. Special Conditions
i) The liability under this Extension shall not exceed in respect of(a) above, 5% of the Sum Insured by each
item, in respect of (b) above, 5% of the Sum Insured.
ii) The Insured shall notify the Insurer of each additional insurance as soon as it shall come to their
knowledge and shall pay the appropriate additional premium thereon from the date of inception.
iii) Following the advice of any additional insurance as aforesaid, cover by this extension shall be fully
reinstated.
iv) No liability shall attach to the insurers in respect of any Building, machinery, Plant or other contents
while such property is otherwise insured.
Notes-
1: If the insured fails to declare the values of such additions within 30 days after the expiry of the policy,
there shall be no refund of the advance premium collected
2: ‘Contents’ in the above clause shall mean ‘Furniture and Fittings’ and does not include ‘Stocks’
3: This clause should be incorporated at the time of issuing the policy

12. 6. Earth quake
• The Insurance is extended to cover loss or damage
(including loss or damage by fire) to any of the property
Insured by this policy occasioned by earthquake including
Landslide / Rockslide resulting there from but excluding
flood or overflow of the sea, lakes, reservoirs and rivers
caused by Earthquake.
• Special conditions
1) Excess clause 5% of each and every claim subject to a
minimum of Rs.10,000/.
2) Extension cover shall be granted only if the entire property
in one complex / compound / location covered under the
policy is extended to cover this risk and the Sum Insured for
this extension is identical to the Sum Insured against the
risk covered under main policy except for the value of the
plinth and foundations of the building(s)..

13. • 3) Onus of proof- In the event of the Insured making any claim for loss or damage under this
policy he must (if so required by the Company) prove that the loss or damage was occasioned by or
through or in consequence of earthquake.
Earthquake (Fire and Shock)
Zone I
Zone II
Zone III
Zone IV
Rs.1.00%o
Rs.0.50%o
Rs.0.20%o
Rs.0.10%o
Policy sum Insured
Note :- Dwelling, offices, hotels, shops etc rateable under Section III of the tariff can be
covered by charging a uniform rate of Re 0.10%0 regardless of the zones

14. 7. Spoilage Material Damage Cover :
The cover shall extend to material damage, i.e.
• Loss of stock in process
• Damage to machinery, containers and equipment
(including cost of removal of debris and cleaning)
and shall be provided by a separate item of the
SFSP
Spoilage
Material
Damage
Cover
Stocks in specified
blocks
5 times the Policy
Rate
Machinery,
Containers &
Equipments in
specified blocks
2.5 times the Policy
Rate
Value of stocks
in specified
blocks
M/A value in
specified blocks.

15. 8. Leakage & Contamination Cover :
• Policy may be extended to include the risks of
(a) accidental leakage
(b) accidental leakage and contamination
• Special Exclusions when both leakage and contamination and
only leakage is covered:
 Contamination through Improper Handling or Controls by
Insured’s own Employees
Resulting from loss of use, loss of earnings, delay or loss of
markets or other consequential or indirect loss or damage of any
kind or description whatsoever;

16. Leakage And
Contamination
Cover
Where the tanks
are within the
Insured’s own
premises
Where the tanks are
located elsewhere
Leakage
Cover
only
Rs.5%o
Rs.6%o
Leaka
ge &
Conta
minati
on
Rs.10
%o
Rs.12
%o
Specif
ied
sum
insure
d
 Loss resulting from any kind of infidelity or
dishonesty on the part of the Insured or any of their
employees, inventory shortage, mysterious
disappearance or unexplained loss.
Loss by burglary or theft or any attempt thereat
 Resulting from shrinkage, evaporation, loss of
weight unless caused by a peril not otherwise
excluded.
 Any legal and/or contractual liability arising from
any cause whatsoever of any nature

17. 9. Temporary removal of stocks.
• This extension does not apply to stock if it is insured.
• The pro-rata condition of average should be applied to
the limit of stocks temporarily removed as well as to the
total sum insured of such stock under the policy.
Temporary
Removal of
Stocks Clause
10% of
policy
Rate
Policy
sum
insured

18. 10. Terrorism
• Covers the potential losses and liabilities that might occur
due to terrorist activity.
• The sum insured opted for can include material damage &
business interruption.
• The maximum aggregate loss may vary from company to
company.
• The premium charged will vary based on the risk
occupancy (i.e. industrial/non industrial /residential) and
on the sum insured.
• Mid-term inclusion of terrorism coverage is not allowed.
Industrial Risks Non Industrial risks
Terrorism 0,25(upto 1000crs) 0.15 +0.08(Dwellings)

19. 1. Architects, Surveyors and Consulting Engineers Fees (
in excess of 3% of the claim amount)
• The expenses incurred towards Architects, Surveyors and
Consulting Engineers fees for plans, specification tenders,
quantities and services in connection with the
superintendence of the reinstatement for the Building,
Machinery, Accessories and equipment insured under this
policy upto 7.5% of the adjusted loss is covered.
• It is understood that this does not include any cost in
connection with the preparation of the Insured’s claim or
estimate of loss in the event of damage by insured perils”.

20. 2. Removal of Debris (in excess of 1% of the claim amount)
• It covers the cost incurred by an insured in the removal of debris
from the premises of the insured, following destruction or
damage by Insured Peril by incorporating the following clause :
• On costs and expenses necessarily incurred by the insured
(a) The removal of debris from the premises of the Insured
(b) Dismantling or demolishing
(c) Shoring up or propping

21. 3. Loss on rent
• In this add on, loss of rent caused by Insured Perils is
covered, the following Rent Clause should be inserted
in the Policy:-
• The insurance on rent applies only if
 (any of) the said building(s) or any part thereof is unfit
for occupation in consequence of its destruction or
damage by the perils insured against
 The amount payable shall not exceed such portion of
the sum insured on rent as the period necessary to the
term of the Rent Insured
Loss Of Rent clause Policy Rate Specified
sum
insured

22. 4. Insurance of additional expenses of rent for
alternative accommodation.
• Additional Rent: If the insured is the Owner-Occupant, the additional rent borne by him is arrived at
after deducting the standard rent of the premises from the actual rent paid for the alternative
accommodation. The standard rent shall be based on the rateable values fixed by the
Municipal/Revenue authorities for tax purposes
• If the insured is a tenant only and for safeguarding his legal tenancy rights is obliged to pay rent for the
premises even during the period when it is not fit for occupation, the additional rent borne by him is
the actual rent for the alternative accommodation
• If the insured is a tenant and is not obliged to pay rent for the premises during the period when it is not
fit for occupation, the additional rent borne by him is the actual rent paid for alternative
accommodation taken less the rent which he was paying for the premises immediately prior to the same
being damaged or destroyed by Insured Perils and rendered unfit for occupation.
• Additional expenses of rent for an alternative accommodation in respect of non-manufacturing risks
may be covered on the following basis:

23. • A) The cover may be granted for non-
manufacturing premises only
• B) The cover may be granted under the Policy and
not under Consequential Loss (Fire) Policy
• C) The period of Indemnity may be limited to the
period during which the original premises remain
untenantable as a result of occurrence of perils
insured against. Maximum indemnity period not to
exceed 3 (three) years.
• D)The additional expense recoverable under the
policy may be additional rent actually paid i.e. the
difference between the new and the original rent
only
• E) The cover may be limited to buildings other than
those of“ Kutcha” construction.

24. 5. Start up expenses
• In this add on, start up costs caused upon the loss or
damage to the insured property, is covered
• The start up costs should be inserted in the Policy.
• These costs are necessarily reasonably incurred by the
insured consequent upon a loss or damage covered by
this policy.
Start up
Expenses
Policy
Rate
Specified sum
insured

25. Case study 1
• When the local council completely stopped access to Vinit’s lodge, his business naturally
came to a grinding halt. A water pipe had broken in the street outside his lodge. What’s
more, the water and electricity supplies had both been shut down for safety reasons. So
there was no power, no water and no customers! Fortunately, Vinit had taken Standard Fire
& Special Perils Policy with XYZ Insurance. Along with it he had extended the cover by
taking add ons. This covered his loss of income and wages. It also helped him pay his
outgoings while the lodge was closed. Happily, the closure only lasted a week and with the
cash settlement from XYZ covering one week’s business interruption, Vinit hardly felt the
pain at all.
• Which type of add on cover he took? Peril or expenses
• What is the coverage name of the add on?

26. Case study 2
• Mr. Ankit is a well known business man who owns no. of restaurant outlets in different places
inside the country. Two years back he opened a new branch in Srinagar (J&K) observing the
need of restaurant and high potential of business there. His Srinagar branch was doing very
good business. One day morning he got an unexpected call from the manager of the restaurant
informing him about J&K earthquake and his damages. As his restaurant has not incurred
major losses as it was in away from big buildings and localities. Minor losses have occurred as
the boundary wall broke and the materials inside the restaurant were damaged. He had taken
Standard Fire & Special Perils Policy from ABC Insurance Company for his restaurant as it was
highly prone to fire and related accidents. He had also taken no. of add on covers in the policy.
His losses in form of breaking of boundary wall, debris removal and damage of the materials
inside were covered . He was very happy as he had not incurred any loss due to the earthquake
damage.
1. How many add on covers he had taken?
2. What were the names of the add on covers?

27. Case study 3
• Donna owned a Cyber Café which was doing quite well until heavy rain from a storm caused water
damage to the café’s floor coverings. Donna had a Standard Fire and Special Perils Policy as the
café was on a high risk of fire with IJK Insurance company. She had also taken earthquake add on
cover in the policy. So she lodged a claim for the damage along with a quotation to replace the
flooring. After gaining a little more information from Donna, IJK company had no hesitation in
approving her claim. They were waiting on a report from a qualified repairer but took Donna’s
word and paid the claim within five days of receiving it.

28. MCQs
1. Under which of the following conditions the fire policy will cease
a). Changes in trade or manufacture activities
b). Unoccupancy of the building for more than 30 days
c). Transfer of insurable interest unless by will or operation of law
d). All of the above.
2. Which of the following perils is an add-on cover under the Fire policy at extra premium?
a). Spontaneous combustion c). Flood
b). Impact Damage d). Explosion

29. MCQs
3. Is forest fire covered in Standard Fire and Special Perils Policy
a). Yes, it is covered
b). No, it is not covered
c). Yes, but with an add on cover
d). None of these
4. What % policy rate as temporary removal of stocks cleared as an add on cover?
a) 14 b) 12 c) 10 d) 8

30. Answers
1. D
2. A
3. C
4. C