A fire insurance policy is an important portfolio of every general insurer. It is equally important for all its consumers ranging from small shopkeepers to mega industrial complexes. Though commercial organizations are exposed to various kinds of pure risk, fire insurance is the most preferred insurance cover by all financial institutions as collateral security against finance made by them.

Fire insurance is traditionally transacted not as a standalone Fire Insurance product, but as a package covering certain allied peril including Special Peril like, Riot, etc., and Act of God (AOG) perils likes Flood, Earthquake, et. Accordingly the prevalent fire policy in Indian market is known as Standard Fire and Special Peril Policy.

benefits of fire insurance policy

Section of the Fire Tariff:

Total no of section – 8

Section l  – General Rules & Regulations

Section ll – Standard Fire & Special Peril Policy

Section lll – Rating of simple risk Eg. Dwellings/Shop/Offices/Hospitals/Educational Institutions.

Section lV – Rating of Industrial and Manufacturing Risk.

Section V – Rating of Stand-alone Utilities Located Outside Industrial And Manufacturing Risk Eg. Boiler House, Pump House and Pipe Lines, Analytic Laboratory, Electric Substation, etc.

Section Vl – Storage risk outside the compound of industrial / Manufacturing risk -rates provided according to the type of goods-hazardous, non-hazardous, etc.

Section Vll – Tanks Farms/Gas Holders outside the Compound of Industrial/ Manufacturing Risk.

– Storage of Liquefied Gas

– Liquids/Chemicals/Oil

– Inflammable Liquid/Gas

Section Vlll – Add-On Covers

General Rules & Regulations (Section l )

1.    Policy

a.    Only Standard Fire and Special Perils Policy with the permitted “Add- on “covers, if any can be issued. Unless otherwise specifically provided for, this Guide Rate is applicable to land-based properties only.

b.    The wordings of the policy are as shown in Section ll of the Guidelines.

c.    Proposal from completely filled in and duly signed by the Proposer/ Client is compulsory.

d.    Policy/ies should be read together with Proposal Forms, Schedule, specification, endorsement, warranties and clauses as one Contract.

e.    Unless otherwise specifically provided for the Policy (ies) covering Buildings and/or contents shall show blocks separately with amounts on

(i)            Buildings

(ii)           Machinery and accessories

(iii)          Stock and Stock in process

(iv)         Furniture and other contents

f.     It is permissible to exclude Storm, Tempest, Flood and Inundation group of perils and/or Riot Damage perils at inception of the policy by deleting the relevant perils from the Policy. The deletion shall apply for the entire interest property in one compound/ complex/ location covering the entire interest of the Insured under one or more policy (ies) without any option for selection.

g.    Any risk, which has not been provided for in the Guide Rate, shall be referred to RO/HO for rating. Provisional rate of Rs. 2.50 per mille shall be charged in such cases for covering the risks under the standard Fire and Special Perils Policy. No discounts and/or Agency Commission shall be allowed on this rate.

h.    Rates shown in the Schedule are Guide Rates. Discounts can be given subject to approval as per the guidelines and subsequent revisions.

i.      Foe Add on Covers, additional rates provided in the Guide Rates shall be charged.

j.      Policies for a period exceeding 12 months shall  not be issued except for “ Dwelling/ Flats”

2.    Value Policies

Value Policies can be issued only for properties where Market Value cannot be ascertained e.g., Curios, Works of art, Manuscripts, Obsolete machinery and the like, subject to valuation certificate being submitted and found acceptable by the Insurers.

3.    Payment Of Premium

Premium shall be paid in full at inception before commencement of risk and shall not be accepted in installments or by deferred payments in any form. It is not permissible to split Sum Insured of the same property under various policies for different periods of insurance to derive advantage of deferred installments for payments of premium.

4.    Minimum Premium

Minimum Premium shall be Rs. 100/- per policy except for risks ratable under Section III and “Tiny Sector Industries” under Section IV in which cases the Minimum Premium shall be Rs. 50/- per policy.

5.    Mid-Term Cover (Except RSMD & Terrorism)

Generally, it is not permissible to grant mid-term cover for STFI and/or RSMD perils. Where such cover is granted guideline provisions apply.

6.    Partial Insurance

It is not permissible to issue a policy covering only certain portions of a building. Notwithstanding this, the plinth and foundations or only foundation of a building may be excluded.

It is further not permissible to issue a policy covering only specified machinery (except Boilers) , parts of machinery or accessories therefore housed in the same block/ building.

7.    Rate For Short Period Insurance

Policies for a period of less than 12 months shall be issued at the rates set out for Short period Insurance. Please refer separate Sheet at the end of this book for Short Period chart.

N: Extension of short period policies shall not be permitted.

8.    Rules For Cancellation

A.    For cancellation of insurance policy at the option of the insured:-

a)    Retention of premium shall be Short Period Scale for the period the policy has been in force, subject to the retention of minimum premium by the Underwriting office.

b)    During the currency, if a policy is replaced with us by a new annual one covering the identical property, refund of premium may be allowed on pro-rata basis at the original rates for the sum insured replaced.

c)    For the sum insured not replaced, refund must be calculated after charging premium at short period scale on such sum for the time the insurance has been in force subject to retention of the minimum premium by the Underwriting office.

d)    In case of short period policies, premium shall be retained at the applicable short period scale.

N: In case a policy is cancelled on account of a Government Order or on completion of a “Building course of construction” or where Buildings are demolished, pro-rata of premium may be allowed.

B.    For cancellation of the Insurance Policy at the option of the Underwriting office, refund of premium shall be on pro-rata basis for the unexpired term.

9.    Loading For “Kutcha “Construction

Building(s) having walls and/or grass/hay of any kind/bamboo/plastic cloth/asphalt cloth/canvas/ tarpaulin and the like shall be treated as “Kutcha” construction for rating.

An additional rate of Rs. 3.00 per mile shall be charged for such building(s) and/or contents therefor.

10.  Mid-term Revision In Sum Insured

. Increase in sum insured: On pro-rata basis

. Decrease in sum insured: On short-period basis

11.  Escalation Clause (Not For Stock)

Under this clause, Sum Insured on respective items will be automatically increased proportionately from the date commencement of the policy to the date of loss based on the selected percentage.

Increase shall not exceed more than 25% of Sum Insured

The additional premium will be 50% of the full rate on such selected percentage increase and to be paid in advance. This clause will not apply to policies covering Stock. Pro-rata condition of average will apply.

12.  Rating Of Risks In Multiple Occupancy Industrial Estate

Risks in multiple Occupancy Industrial Estates shall be rated ‘Per Se’. If the entire building of the Industrial Estate is ensured under one sum insured, a rate of Rs. 1.50% (per mile) shall be charged to the ‘building’.

13.  Silent Risks

Risks relatable under Sections IV and V are allowed silent rates as per the following table.

Factories where no manufacturing / storage activities are carried out continuously for 30 days or more.Retention of the premium shall be based on the appropriate storage rate or silent risk rate of Rs. 0.60%o ( Rs 1.00% as per erstwhile AIFT) whichever is highest for the silent period.

Note:

1.    Silent rates are not applicable if a risk goes silent following a loss under the policy.

2.    The deletion facility for STFI / RSMD perils in respect of “Silent Risks” , it is permissible to exclude STFI/RSMD perils at the inception of the policy only in case of risks relatable under the Section IV and V of these guidelines.

14.  Rating Pattern Under Fire Policy

a.    Rate: Based on nature of the particular risk, identify the class to which it belongs e.g. an industrial unit or a storage risk.

b.    Find out the applicable erstwhile AIFT rate.

c.    Less: Rate or deletion of STFI

d.    Less: Rate for deletion RSMD (if opted)

e.    Add: Loading for Kutcha construction (if applicable)

f.     Add: Premium for ADD on covers of opted for

g.    Less: De-tariff discount as sanctioned by Competent Authority

h.    Add: Premium for STFI, Earthquake, Terrorism

–          No discounts are allowed on STFI, Earthquake & Terrorism covers.

–          No discounts is to be allowed in lieu of Agency Commission/Brokerage in case of Direct Business.

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