The document provides information on standard fire and special perils insurance as well as loss of profit insurance. It covers the purpose of fire insurance which is to compensate for financial losses from fire and allied perils. It then details the various properties covered by fire insurance including buildings, machinery, goods, and more. It lists the perils covered such as fire, lightning, explosion, aircraft damage, storms, and others. It also outlines exclusions to coverage and basis for valuation of insured properties and stocks. Finally, it discusses loss of profit insurance which covers trading losses from business interruptions due to insured fire perils.

1. Standard Fire and Special
Perils
and
Loss of Profit
Insurance

2. Fire Insurance is considered as a
basic requirement for security. The
function of Fire insurance is to
make good the financial loss
suffered as a result of fire and allied
perils.
PURPOSE OF FIRE INSURANCE

3. PROPERTY COVERED
The fire insurance policy is meant to cover erected fixed
assets whilst lying at a particular location and declared
accordingly for insurance. It includes:
- Buildings
- Electrical installation in buildings
- Contents of buildings such as machinery, plant and
equipment, accessories, etc.
- Goods (raw materials, in process, semi finished,
finished, packing materials, etc) in factories, godowns,
tank farms
- Goods in the open
- Contents in dwellings, shops, hotels, etc
- Furniture, fixtures and fittings
- Pipelines (including contents) located inside or outside
the compound

4. • Perils Covered
 Fire
 Lightning
 Explosion/Implosion
 Aircraft Damage
 Riots, Strikes, Malicious And Terrorism Damage (Add On):
 Storm, Cyclone, Hurricane ,Typhoon, Tempest, Tornado, Flood
And Inundation.
 Earthquake(add On)
 Impact Damage
 Subsidence And Landslide Including Rock Slide
 Bursting And Overflowing Of Water Tanks And Apparatus And
Pipes
 Missile Testing operations
 LEAKAGE FROM AUTOMATIC SPRINKLER INSTALLATION
SYSTEM

5. PERILS COVERED
• FIRE:

6.  Excluding destruction or damage caused to
the property insured by
a) i) its own fermentation ,natural heating
or spontaneous combustion.
ii) its undergoing any heating or drying
process.
b) burning of property insured by order of
any Public Authority.

7. • LIGHTNING:

8. • EXPLOSION/IMPLOSION:
Explosion: Implosion:

9.  Excluding loss, destruction of or
damage
a) to boilers (other than domestic
boilers), economizers or other
vessels, machinery or apparatus(
in which steam is generated) or
their contents resulting from
their own explosion/implosion,
b) caused by centrifugal forces.

10. • AIRCRAFT DAMAGE:
 Loss, Destruction or damage caused by Aircraft, other
aerial or space devices and articles dropped there from
excluding those caused by pressure waves.

11. RIOTS, STRIKES, MALICIOUS AND
TERRORISM DAMAGE (Add on):

12.  Loss of or visible physical damage or destruction by
external violent means directly caused to the property
insured but excluding those caused by,
a) Total or partial cessation of work or the retardation or
interruption or cessation of any process or operations or
omissions of any kind.
b) Permanent or temporary dispossession resulting from
confiscation, commandeering, requisition or destruction
by order of the Government or any lawfully constituted
Authority.
c) Permanent or temporary dispossession of any building
or plant or unit or machinery resulting from the
unlawful occupation by any person of such building
or plant or unit or machinery or prevention of access to
the same.
d) Burglary, housebreaking, theft, larceny or any such
attempt or any omission of any kind of any person
(whether or not such act is committed in the course of a
disturbance of public peace) in any malicious act.

13. STORM, CYCLONE, HURRICANE ,TYPHOON, TEMPEST, TORNADO,
FLOOD AND INUNDATION.
Storm Cyclone

14. Flood Hurricane

15. • EARTHQUAKE(ADD ON):

16. • Earthquake Zones
Zone I: 0.5 %0 Zone II: 0.25%0
Zone III:0.1%0 Zone IV:0.05%0

17. Impact Damage

18.  Loss of or visible physical damage or
destruction caused to the property insured
due to impact by any Rail/ Road vehicle or
animal by direct contact not belonging to
or owned by ,
a) the Insured or any occupier of the
premises or
b) their employees while acting in the
course of their employment.

19. • SUBSIDENCE AND LANDSLIDE INCLUDING ROCK SLIDE:
Rock slide Land Slide

20.  Loss, destruction or damage directly caused by
Subsidence of part of the site on which the
property stands or Land slide/Rock slide
excluding:
a) the normal cracking, settlement or bedding
down of new structures
b) the settlement or movement of made up
ground
c) coastal or river erosion
d) defective design or workmanship or use of
defective materials
d) demolition, construction, structural
alterations or repair of any property or
groundwork's or excavations.

21. • BURSTING AND OVERFLOWING OF WATER TANKS AND APPARATUS AND
PIPES:
Burst pipe

22. Missile Testing operations

23. • LEAKAGE FROM AUTOMATIC SPRINKLER INSTALLATION
SYSTEM:
Sprinkler System leakage from sprinkler system

24.  Excluding loss, destruction or
damage caused by
a)Repairs or alterations to the
buildings or premises
b) Repairs, Removal or Extension of the
Sprinkler Installation
c) Defects in construction known to
the Insured.

25. • BUSH FIRE:
Excluding loss, destruction or damage caused by Forest Fire

26. GENERAL EXCLUSIONS

27.  EXCESS: This Policy does not cover (not applicable to policies
covering dwellings by individual owners)
-
The Excess shall apply per event per insured.
up to 10 crore
5% of claim amount subject to a
minimum of Rs 10,000/-
above 10 cr up to 100 cr
5% of claim amount subject to a
minimum of Rs. 25,000
above 100 cr and up to 1500 cr
5% of claim amount subject to a
minimum of Rs. 5 lakhs
above 1500 Cr and up to 2500 cr 5% of claim amount subject to a
above 2500 Cr
5% of claim amount subject to a
minimum of Rs. 50 lakhs

28. • Loss, destruction or damage caused by
war, invasion, act of foreign enemy
hostilities or war like operations (whether
war be declared or not), civil war, mutiny,
civil commotion assuming the proportions
of or amounting to a popular rising, military
rising, rebellion, revolution, insurrection or
military or usurped power.

29.  Loss, destruction or damage directly or indirectly
caused to the property insured by
a) ionizing radiations or contamination by
radioactivity from any nuclear fuel or from any
nuclear waste from the combustion of nuclear fuel.
b) the radio active toxic, explosives or other
hazardous properties of any explosive nuclear
assembly or nuclear component thereof.
 Loss, destruction or damage caused to the insured
property by pollution or contamination excluding
a) pollution or contamination which itself results
from a peril hereby insured against
b) any peril hereby insured against which itself
results from pollution or contamination

30.  Loss, destruction or damage to bullion or unset precious
stones, any curios or works of art for an amount
exceeding Rs. 10000/-, plans, drawings, securities,
obligations or documents of any kind, stamps, coins or
paper money, cheques, books of accounts or other business
books, computer systems records, explosives unless
otherwise expressly stated in the policy.
 Loss, destruction or damage to the stocks in Cold Storage
premises caused by change of temperature.
 Loss, destruction or damage to any electrical machine,
apparatus, fixture, or fitting arising from or occasioned by
over-running, excessive pressure, short circuiting, arcing,
self heating or leakage of electricity from whatever cause
(lightning included) provided that this exclusion shall
apply only to the particular electrical machine,
apparatus, fixture or fitting so affected and not to other
machines, apparatus, fixtures or fittings which may be
destroyed or damaged by fire so set up.

31.  Expenses necessarily incurred on (i) Architects,
Surveyors and Consulting Engineer's Fees and (ii)
Debris Removal by the Insured following a loss,
destruction or damage to the Property insured by an
insured peril in excess of 3% and 1% of the claim
amount respectively.
 Loss of earnings, loss by delay, loss of market or other
consequential or indirect loss or damage of any kind or
description whatsoever.
 Loss, or damage by spoilage resulting from the
retardation or interruption or cessation of any process
or operation caused by operation of any of the perils
covered
 Loss by theft during or after the occurrence of any
insured peril except as provided under Riot, Strike,
Malicious and Terrorism Damage cover.

32.  Any Loss or damage occasioned by or through or
in consequence directly or indirectly due to
earthquake (add on), Volcanic eruption or other
convulsions of nature.
 Loss or damage to property insured if removed
to any building or place other than in which it is
herein stated to be insured, except machinery
and equipment temporarily removed for
repairs, cleaning, renovation or other similar
purposes for a period not exceeding 60 days.
 Terrorism inclusion is considered as add on i.e.
by paying extra premium one can avail for the
same.

33.  REINSTATEMENT VALUE (RIV) & Market Value
• The indemnity in any policy is subjected to the Sum Insured and other terms
of policy.
• Sum Insured can be fixed on
• Market value or
• Reinstatement Value
• Market Value means the present cost of construction of similar property,
after deducting depreciation from the cost. Depreciation is based on age,
usage, maintenance etc. Here depreciation refers to actual intrinsic physical
depreciation.
• Reinstatement Value means the value at which the damaged property can be
reinstated or replace by new property of same kind, without deducting
depreciation.
• Difference between RIV and Market Value: The main difference in above two
is,
Under RIV basis, no depreciation will be deducted if property will be
reinstated. and
Under Market Value basis, depreciation will be deducted.

34. BASIS OF VALUATION:
Property Sum Insured
1. Building
2.Plant, Machinery and Accessories
3. Fixture, Furniture & Fittings Market Value or RIV
4. Electrical Installation, office
equipmets
5. Other Content like house hold
effect and contents in shops etc

35. Stocks:
a. Raw Material : Cost at which the insured can purchase it
in market to replace the damaged RM.
RM= Landed cost+ Excise duty/other applicable taxes
b. Stock in process : Cost of RM including the expenses
incurred up to the stage it has been processed.
SIP= RM cost + excise+ processing cost up to the stage
c. Finished Goods: Cost of RM +overhead expenses till it
reaches the finished goods stage.
FG=Cost of raw material +excise +manufacturing cost
including all overheads.

36. Declaration policy
• To take care of frequent fluctuations in stocks/stock
values declaration policies can be granted for the Sum
Insured not less than 1 Crore in one or more locations
and the Sum Insured should shall not be less than 25 lakhs
in at least one of this location.
• Monthly declarations based on a) the average of the
values at risk on each day of the month or b) the highest
value at risk during the month shall be submitted by the
Insured latest by the last day of the succeeding month.
• If declarations are not received within the specified
period, the full sum insured under the policy shall be
deemed to have been declared.
• Reduction in sum insured shall not be allowed under
any circumstances.

37. Cont…
• Refund of premium on adjustment based on the declarations/
cancellations shall not exceed 50% of the total premium.
• The basis of value for declaration shall be the Market Value
anterior to the loss.
• It is not permissible to issue declaration policy in respect of
-Insurance required for a short period.
-Stocks undergoing process.
-Stocks at Railway sidings.
• If after occurrence of any loss it is found that the amount of last
declaration previous to the loss is less than the amount that
ought to have been declared, then the amount which would have
been recoverable by the insured shall be reduced in such
proportion as the amount of said last declaration bears to the
amount that ought to have been declared.

38. Floater Policies
Floater Policy (ies) can be issued for stocks at
various locations under one Sum Insured
• The rate shall be the highest rate applicable to
insured's stocks at any location with a loading of 10
%.
• In case Stocks in a process block are covered under
the Floater Policy and the rate for the process block
is higher than the storage rate, the process rate plus
10% loading shall apply.
If stocks situated within godowns/process blocks in the
same compound are covered under floater policy, no
floater extra is chargeable.

39. FIRE LOSS OF PROFIT
• Why FLOP (Fire loss of profit) is required?
• Fire insurance is designed to provide protection in respect
of loss to buildings, machineries, fixtures, goods etc. by fire
and or other insured perils. In other words fire insurance
affords cover for ‘material damage’. However, an
indemnity for the material damage does not provide
complete protection to the insured who will also suffer
trading losses due to total or partial stoppage of his
business. The object of loss of profit insurance (also
known as Consequential Loss or Business Interruption
insurance) is to make good for loss of gross profit.
• FLOP policy covers the loss of gross profit if the loss is due to
perils covered under Fire Insurance.

40. • What it covers?
• FLOP insurance covers trading losses which result from
stoppage of the business.
 Trading loss may be considered under three headings,
• Net profit: income - Expenditure
• Standing Charges: expenses which are fix in nature
irrespective of the volume of business transacted.
• Increase cost of working: expenditures incurred by insured
to maintain the business at its normal level.

41. • How to evaluate Sum insured and Indemnity period?
The indemnity period is the maximum period required to put the
business back into normal operation after damage to insured property
by an insured peril. This would depend on extent of loss and the nature
of particular business. The detailed analysis has to be made such as
indemnification of the key or critical parts, their availability, type of
supplier, relative importance in production and time required to re-
commission the same. In other words Indemnity period should be the
maximum period or the Lead Time required to restore the critical
equipment or to put the business into normal operation status. This
indemnity period is chosen by insured, it may vary from 3 months to 3
years.
• The Sum insured is to be computed from the insured’s account e.g. P&L
accounts. Further the selection of sum insured depends on the
indemnity period chosen like take an example for indemnity period of
12 month or less –in that case the SI should be equivalent to annual
gross profit

42. Indemnity Period
• Indemnity Period: The profits policy provides
indemnity in respect of loss of gross profit during
indemnity period which is selected by the insured.
The indemnity period can be varied from 3
months to 3 years. The choice of indemnity
period would be influenced by the time that
would be taken for reinstatement of building,
replacement of machinery etc. It should be of
such duration that it will represent the longest
period during which he business could be
affected following a serious fire.