Page 280 - DMGT303_BANKING_AND_INSURANCE

Unit 13: General Insurance

Classification of Fire Insurance Policies Notes

Standard Fire Policy

Fire insurance business in India is governed by the All India Fire Tariff that lays down the terms
of coverage, the premium rates and the conditions of the fire policy. Fire insurance policy is
suitable for the owner of the property, one who holds property in trust or in commission;
individuals/financial institutions who have financial interest in the property. All movable and
immovable property located at particular premises such as building, plant and machinery,
furniture, fixtures, fittings and other contents, stocks and work-in-progress along with goods
held in trust or in commission including stocks at suppliers/customer's premises, machinery
temporarily removed from the premises for repairs can be insured.
The fire insurance policy has been renamed as standard fire and special perils policy. The risks
covered are as follows:
Fire

Destruction or damage to the property insured by its own fermentation, natural heating or
spontaneous combustion or its undergoing any heating or drying process can't be treated as
damage due to fire. For example, paints or chemicals in a factory undergoing heat treatment and
consequently damaged by fire are not covered. Further, property insured by order of any Public
Authority is excluded from the scope of cover.

Lightning

Lightning may result in fire damage or other types of damage, such as a roof broken by a falling
chimney struck by lightning or cracks in a building due to a lightning strike.

Explosion/Implosion

Explosion is defined as a sudden, violent burst with a loud rapport. An explosion is caused
inside a vessel when the pressure within the vessel exceeds the atmospheric pressure acting
externally on its surface.
An implosion means bursting inward or collapses. This takes place when the external pressure
exceeds the internal pressure. This policy, however, does not cover destruction or damage
caused to the boilers (other than domestic boilers), economizers or other vessels in which steam
is generated and machinery or apparatus is subject to centrifugal force by its own explosion/
implosion.
These risks may be covered in separate and special boiler and pressure plant insurance policy.

Aircraft Damage

The loss or damage to the property (by fire or otherwise) directly caused by an aircraft or other
aerial devices and/or articles dropped there from is covered under the fire policy. However,
destruction or damage resulting from pressure waves caused by an aircraft traveling at supersonic
speed is excluded from the scope of the policy.

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