FIRE INSURANCE

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UNITED INDIA INSURANCE COMPANY LIMITED

NALANDA - CORPORATE LEARNING CENTRE, CHENNAI

FIRE INSURANCE
IMPORTANT POINTS
Burning Cost is calculated for determining the rating only
The silent risk rate is to be charged on storage rate or silent rate whichever is higher, if
the there is a storage of material. When the claim occurs the silent rate will not apply
for the future period.
Damage caused only by smoke is excluded under Fire Policy.
The insurance ceases if
1) trade or manufacturing activity is changed
remain unoccupied for the period more than 30 days

2)

Sum insured on the RIV should reflect cost of rebuilding of subject matter on the date of
loss
Percentage of obligatory cession to GIC under Fire is 10%
FOES (Failure of Electric Supply) is an extention under DOS(Detoration of Stock)
Loss or damage to the property due to sprinkler leakage , if the leakage is caused
other than fire not covered
In agreeed bank clause, the material change in risk, affects the interest of the banker.
Project policies are ALL RISK policies.
Silent risk rate are under Sec IV & V of the Fire Tariff.
Fire at supplier's premises can be a part of LOP Policies if agreed by the both the
parties.
In Fire declration policy mininium sum insured 1 Cr and the sum insured shall not be
less than 25 lacs at least one of this location. Retention of Premium is 50%. Provisional
premium for refund.
In floater Declaration Policy minimum sum insured is Rs. 2 cr and retention of premium
80%.for refund.
Under standard fire and Special Peril policy 12 Perils are covered 1.fire 2. lightning 3.
explosion 4. RSMD 5. aircraft damage 6.impact damage(outsiders) 7.subsidence and
landslide 8.STFI 9. bursting/over flowing of water tanks & pipelines 10. Missile testing
11. Accidental leakage of sprinklers 12.bush fire . There are 14 General Exclusions and
15 General Conditions.
Theft or larceny is not covered under fire policy
The basic fire Policy covers Architect fees 3 % claim amount and debris removal upto
1% of claim amount. By paying additional premium it can be extened the architect fee
upto 7.5 % and debris removal upto 10% of SI
In detoriation of stock in cold storage 1. failure of electric supply at the main /sub
station (feeder) may be outside of the premises 2. change in temparature due to failure
of cold storage of machinery is covered arrising out of loss/damage to the machineries
due to the insured peril .
Time excess claue is 24 HOURS (in above)
In spontaneous combustion there are 4 cateogies of subject matter.
Esclation clause for fixed assets only. premium at 50% of policy rate.Max. limit 25% of
SI
In declaration policies no reduction is sum insured is allowed

Reinstatement value clause is deviation from principles of indemnity (new for old)
No deduction of depriciation in RIV
In RIV the replacement must be completed within 12 months after the destruction or
the period extended by Ins. Co. Otherwise the claim will be settled on Market value
basis.
Lightning is an AOG Peril
IAR Policy : all industrial risk having Overall SI 100 Cr & above in one or more location
including petro chemical risks. It is ALL RISK Policy. It covers, fire& special perils,
Burglary, LOP due to fire. Optional cover MLOP. Fire risk as per tariff, LOP due to fire
tarrif -10%. MB 2.5%o on all Machinery, and burglary free of cost. IAR Policy allows
under Insurance upto 15% of Sum Insured
Mega risk sum insured > 2500 Crores
The SI is reduced by the amount of claim and therefore there is automatic
reinstatement of SI clause in Fire Policy
Long Term Policy can only be issued to dwelling and for minimum period of 3 years
Tsunami risk covered only when both STFI and EQ are covered
In LOP policy Gross Profit means Net Profit + specified Standing charges (or) turnovervariable charges.
Partial cover under Fire Policy cannot be granted
Standard Fire Policy does not cover explosion of boiler but covers explosion of domestic
boiler.
STFI can be deleted at the inception of the policy but in case of mid term inclusion, 15
days waiting period is applicable.
Storage of hazardous chemical upto 5% of value at risk does not affec the claim.
Terrorism pool is managed by GIC and present pool amount is Rs.1000 crores
Not covering plinth and foundation never means under insurance.
Valued policy as agreed can be issued only for work of art/curious/obsolete
MACHINARIES.
Multiple occupancy building per se rating is permitted
AIFT classifies for 4 EQ Zones
Local authorities clause is a must along with the RIV policies
Claims experience discounts are applied for SI 50 crores and above.
It is the duty of insured to inform insurer 1) Fall or dis placement without operation of
insured peril within 7 days 2) Material alterations & change in manufacturing 3) change
of interest 4) if unoccupied for more than 30 days.
Insurable interest is the legal right to insure
Insurable Interest arises due to OWNERSHIP,BAILER/BAILEE,LESSOR/LESSEE, AS A
FINANCIER, GOODS HELD IN TRUST ETC
Indemnity is putting a person in the same pecuniary position as he was before the loss,
after the loss
Fire policy is a policy of strict indemnity
The 3 sides of a Fire Triangle are fuel, ignition and oxygen

The excess in a fire policy:

1) SI upto Rs.10 crores per location - 5% of claim amount,
minimum 10,000/2) SI 10 crores to 100 crores per location - 5% of claim
amount, Minimum 25,000/- 3) SI 100 crores to 1500 cr. per location - 5% of claim
amount, minimum 5,00,000/- 4) SI 1500 cr to 2500 cr per location - 5% of claim
amount, minimum, 25,00,000/- SI more than 2500 cr per location - 5% of claim
amount, minimum 50,00,000/The excess is applicable per event per insured
The maximum period for which MACHINES & EQUIPMENTS if shifted for maintenance or
repair are held covered is 60 days
Bush fire is basic cover but forest fire is an add on cover
Reinstatement value can be given for building, Plant & Machinery & FFF only
Reinstatement value policy cannot be given for stock
Maximum refund under downward adjustment is 50% and no upward adjustment is
allowed.
It is not permissible to issue a fire declaration policy in respect of
1) Insurance required for a short period
2) Stocks undergoing process
3) stocks os railway sidings
Cancellation of Policy at the option of insured is on a short period basis
cancellation of policy at the option of insurer is on a pro-rata basis
CLAIMS ASSESSMENT:
a) Market Value basis: Gross Loss - Less Depriciation - Less salvage Gross assessed Loss - Less under insurance - less excess - net payable.
b) Reinstatement value basis: Gross loss - less salvage-Gross assessed loss
- less under insurance - less excess-net loss payable
According to IRDA regulations, no second surveyor is to be appointed
If a loss occurs within 5 days from the date of inception, the claim is called a close
proximity claim
FLOP = Fire Loss of Profit Policy (FIRE DEPT.)
MLOP= Machinery loss of Profit Policy (ENGG. DEPT.)
ALOP = Advance Loss of Profit Policy (ENGG. DEPT.)
The period which commences from the date of loss till such time the business is
restored in a LOP policy is called Indemnity Period
In an LOP Policy, the items covered under increased cost of working is Rent for
temporary premises, payment of overtime, Hire of machinery
The excess in an LOP policy is called Time excess
A consideration in terms of money received or receivable by the insured for the goods
and services delivered and the service rendered in the course of business carried out
within his premises is called turnover:
ITEMS NOT FALLING UNDER TURNOVER:
a) Any sum receivable for sale of redundant property
b) Income from any source not insured under policy ex rental income
c) Any other business carried out within the insured premises or good
sold or services rendered, but not insured under the policy.
The turnover during the period in the 12 months immediately before the date of
occurrence, which corresponds with the indemnity period is called standard turnover

An organisation having SI of over 2500 crores in 25 locations is not a mega risk

Process losses cannot be covered under a FSSP Policy
Subsidence and landslide losses cover Visible Physical Damage to property
Spontaneous combustion is caused by micro organisms in organic matter stocked
without ventilation in humid condition for a long time
Ex-gratia settlement in Fire Policies are payments made for losses outside the ambit of
the policy
Fire Business in underwritten on the basis of problble Maximum Loss (PML)
In a FLOP Policy, Auditor's fees is covered as an extention and is not an inbuilt cover
Fire at Supplier's premises can be covered under a FLOP policy
Common utilities outside the premises is to be rated on a "per se" basis
Cracks appearing in a building on account of subsidence of land below is not payable
under a Fire Policy.
A Dish antenna breaks when a monkey jumps on it. Is is payable under a fire policy?
Yes, it is payable.
The basis of claim settlement in a fire policy is Market Value or Reinstatement Value
Indemnification of stocks in a Fire policy is based on Market Value or cost whichever is
less.
The "Basis Rate" under FLOP Policy is based on the average rate of the process blocks
under fire policy.
The gross profit insured under FLOP policy would cover Net Profit plus specified standing
charges.
Rating under petrochemical tariff is based on Material Factor of the Raw Materials and
hold up capacity, pressures and temperatures.
Facility of instalment premium is available for project insurance if the project period
exceeds 12 months.
Spontaneous combustion is an Add-on cover covered by paying extra premium.
In a Fire floater policy, the minimum sum insured in one location should not be less than
10% of the total sum insured.
In FLOP Policies, Indemnity Period means Specified interruption period opted
Unless specified, a Fire policy covers work of art upto a limit of Rs.10,000/The word condition of Average is associated with under insurance
AOG Perils means Act of God Perils(EQ,Flood, STFI)
In the event of claim under a fire poicy, the sum insured is reduced by the amount of
claim.
The word "peril" denotes cause of loss
The term 'EJUSDEM GENERICS" means "OF THE SAME KIND".
STFI Perils can be deleted from the Fire Policy at the inception of the policy only.
Exgratia claims can be settled only by the board of directors.
Designation of property clause relates to Fire insurance.
Movement of materials within the premises is covered under an 1AR Policy
Mid term terrorism cover can be granted at full annual premium with 15 days waiting
period.
The term "Time Excess" is applicable to LOP Policies.

While assessing an LOP claim, annual turnover is used to determine the adequacy of
the the sum insured.
Sum Insured under escalation clause in fire policies is automatically increased on a daily
basis.

ENGINEERING INSURANCE
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UNITED INDIA INSURANCE COMPANY LIMITED

NALANDA - CORPORATE LEARNING CENTRE, CHENNAI

ENGINEERING INSURANCE

IMPORTANT POINTS
Hot testing under EAR Policy means testing of parts under Full Load condition.
Cold testing under EAR Policy means testing of parts under No Load condition.
A CAR Policy can be issued where Civil Work in the Project is more than 50% of total contract value
Advance Loss of Profit can be issued in the name of Principal only.
Loss orDamage to replacable parts and operating media is not covered under M.B.
Five classified group of machineries available under CPM and under M.B.
Four types of excess available in Project Policy.( Normal/Testing/AOG/Fire and Explosion)
In SCE Policies Civisl Construction SI should not exceed 50% of the Project Risk..

Material Damage provision of the Business Interruption Policiy state that there should be in existan
material damage policy covering the physical damage to the property for insurance of Business Int
Policy and a claim for loss or damage to the property should be admissible under Material Damage
claim to be admissible under a Business Interruption Policy.
Maximum permissible escalation under CAR/EAR Policy is 50%

Last premium under EAR/CAR Policy where installment facility has been granted has to be made be
months of the expiry day of the policy

Under EAR/CAR Policy installment of premium facility is allowed only if the period is more than 12 m
Under EEI Policy there is no coverage for Application Software.

Escalation by 50% of SI can be chosen by Insured in Project Engineering Insurance as Maximum pe

The exculsions under CAR Insurance Ploicy a) The first amount of loss arising out of each and every
shown as excess in the schedule. B) Normal wear and tear, gradual detoriation due to atmospheri
lack of use of obsoleosence or otherwise, rust scratching of painted or polished surfaces or breakag
Loss or damage due to faulty design.
10%discount may be given in EEI Policy if same property is coveried under Fire Policy.
Loss due to flood is covered under MCE Policy

In EAR & CAR Policy project completed prior to the declare date of completion, Refund of premium
the Claim ratio is below 60%, Minimum period of Insurance should be 18 months and Minimum ref
be at least 3 months.
Scope of extention policy is available in MCE /CAR Policy.
Machinery Loss of Profit (MLOP) does not provide indemnity against Civil Engineering works.
Project Policies are All Risk Policies.

The adjustment of SI in EAR Policy is done in respect of a) Frieght and handling charges b) Custom
Cost of errection

Addon covers for Project Policy a) surronding property b) TP Liability c) Off site Storage and Fabrica

Some of Common General exclusions under MB Policy a) Will ful negligence of the Insured b) Cess
work c) War and necluear risks.d) Overloading operations
Aesthatic Damage is not covered under any policy.

CPM can be covered under EAR or CAR policy where the value of CPM does not exceed 5 % of EAR/
25 Lacs whichever is lower.

Mobile construction Equipments are covered under CAR as well as in CPM.

Floater Risk can be granted by charging 10% of additional premium for specified locations in India

Refund for Stand still period under MB can be considered a) minimum period 3 months continuous
b) The discount varies from 15% to 50% c) The disount will not apply in overhauling period d) No
payable on account of Lock out. Or any claim e) Claim experience should be below 60% f) Not allow
seasonal factory.

CNC Machies can be insured under MB Policy or EEI Policy ( as it is not possible to give breakup of v
Electronic equiptment which are intigral to this machines)

In Turbo Generator Set Insurance under MB requires break of SI of parts/accessories i.e. Turbine, Al
Gear Box, Control Panel, Cables.
Minimum premium under MB Policy is Rs. 100/-

General exclusion under Boiler Explosion Insurance a) No Policy for first loss Basis. B) No policy fo
Clause c) No policy for projects located out side India.d) Agreed Value
IN CPM Transit risk from site to site is excluded.