What is Fire Insurance?

Fire Insurance provides financial coverage for loss or damage to property due to fire and allied perils. It is an essential risk management tool for homeowners, shop owners, factories, and commercial establishments.

• Protects against fire, lightning, explosion, etc.
• Applies to buildings, stock, machinery, furniture, and more
• Available to both individuals and businesses

Importance for Businesses & Individuals

Fire damage can cause huge financial losses and business disruption. A proper fire insurance plan:

• Safeguards capital invested in physical assets
• Protects inventory and operational continuity
• Acts as a collateral support for loans
• Essential for factories, warehouses, retailers, hospitals, schools, etc.

For individuals, it covers fire risk in residential buildings, household contents, and personal items.

What Fire Insurance Covers

A standard fire and special perils policy includes:

• Fire and lightning
• Explosion/implosion
• Aircraft damage
• Riot, strike, malicious damage
• Storm, cyclone, flood, and inundation
• Impact damage (by vehicles, animals)
• Subsidence and landslide
• Bursting and overflowing of water tanks/pipes
• Missile testing operations

The insured amount is based on Reinstatement Value or Market Value.

Add-on Covers

Fire insurance can be enhanced with the following add-ons:

• Earthquake Cover: Covers losses due to tremors and seismic activity
• Loss of Rent Cover: Protects landlords if property becomes uninhabitable
• Architects/Surveyor’s Fees: Reimbursement of expenses for reconstruction plans
• Debris Removal: Covers cost of clearing damaged material after a fire
• Spontaneous Combustion: Especially useful for businesses storing chemicals or combustible goods
• Terrorism Cover: Covers fire damage caused due to terrorism-related events
• Escalation Clause: Protects against inflation in construction material/labor costs

Exclusions & Limitations

Fire insurance does not cover:

• War, invasion, or nuclear risk
• Electrical/mechanical breakdowns (without add-on)
• Losses due to willful negligence
• Burning due to fermentation, spontaneous heating
• Stocks undergoing manufacturing process
• Short circuit damage (unless specifically covered)

Always read the policy wording and check applicable exclusions.

Policy Types

• Valued Policy: Sum insured is agreed in advance (usually for artworks, antiques)
• Floating Policy: For multiple locations—useful for warehouses, stores, and godowns
• Specific Policy: Insures a specific asset/location
• Comprehensive Package Policy: Includes fire, burglary, theft, and other perils

Tax Implications

• For Businesses: Fire insurance premium is treated as a business expense under the Income Tax Act and is allowed as a deduction under "PGBP" (Profits and Gains from Business or Profession)
• For Individuals: No tax benefit for personal fire insurance (like home contents), unless it is used in a home-based business
• Input Tax Credit (ITC): Available under GST if insurance is for business assets and business is GST-registered

Claim Process

1. Intimate the insurance company immediately after the fire incident
2. File an FIR (if required)
3. Submit claim form with documents (fire brigade report, invoices, photos, etc.)
4. Surveyor inspects and estimates loss
5. Insurer processes claim and settles based on terms (reinstatement or market value)

Tip: Install fire safety equipment and maintain a fire log to ensure faster claims.

FAQs for Clients & Businesses

• Can a fire insurance policy be taken online?
  Yes, many insurers offer online fire insurance with digital KYC and instant quotes.
• Is fire insurance compulsory for factory loans?
  Yes, banks usually require fire & property insurance as collateral protection for loans.
• Can I claim loss of profits due to fire?
  Only if you’ve opted for a separate Business Interruption Add-on.
• What if the insured amount is less than the actual value?
  Then claim will be settled proportionately under the "average clause."
• Can I get fire insurance for a rented property?
  Yes. Tenants can insure their belongings, while landlords should insure the building.