Fire Insurance
Fire insurance is a property insurance product that covers the insured's building, plant and machinery, stocks, furniture, and other contents against loss or damage arising from fire, lightning, explosion, and allied perils such as floods, storms, riots, and impact damage, with IRDAI regulating terms and the Standard Fire and Special Perils (SFSP) policy being the primary commercial instrument.
Fire insurance is one of the oldest forms of non-life insurance globally and forms the backbone of commercial property coverage in India. The Standard Fire and Special Perils (SFSP) policy is the standardised form used across Indian non-life insurers, covering a defined set of perils and subject to a common set of terms and conditions prescribed by the Tariff Advisory Committee (now superseded by IRDAI's detariffed framework post-2007). Post-detariffing, insurers have the freedom to price fire insurance competitively, though minimum standard terms are still maintained.
The SFSP policy covers the following named perils: fire, lightning, explosion or implosion (excluding boiler explosion), aircraft damage, riot, strike, malicious damage, storm, cyclone, typhoon, tempest, hurricane, tornado, flood, and inundation, impact by vehicles or animals, subsidence and landslide (with certain exclusions), bursting or overflowing of water tanks, missile testing, bush fire, and leakage from automatic sprinkler installations. Each peril is defined with specific inclusions and exclusions, and policyholders can extend or restrict coverage through endorsements.
Premium computation depends on the sum insured (the value of the property covered), the construction type (pucca, semi-pucca, kutcha), the occupancy (factory, warehouse, office, retail, residential), and the risk profile of the insured (past claims history, fire safety measures installed, proximity to firefighting infrastructure). Industrial and commercial properties carrying stock-in-trade — goods at various stages of manufacture or distribution — are particularly active purchasers of fire insurance as stock values fluctuate significantly with production cycles.
For stock-in-trade coverage, policies can be issued on a 'declaration basis' where the insured submits monthly declarations of stock value and pays premium on the average stock held over the year, adjusting premium at policy expiry. This floating policy structure is practical for businesses with variable inventories. Alternatively, 'floater policies' covering stock across multiple locations under a single sum insured provide operational simplicity for multi-location businesses.
Claims under fire insurance require the insured to intimate the insurer immediately, arrange for a survey by an appointed loss assessor, and submit a complete claim form with documents including FIR (if arson is suspected), fire brigade report, stock registers, purchase invoices, and photographs. IRDAI regulations require insurers to appoint a surveyor within 48 hours and settle or repudiate claims within the prescribed timelines. Under-insurance — where the sum insured is less than the actual property value — triggers the 'average clause,' reducing claim payment proportionally, making accurate valuation critical.