Different Types Of Fire Insurance Policies in USA 2023

A Fire insurance Policy pays the Insured Party for damage caused to the insured assets on account of a fire-related accident. A Fire Insurance Policy offers coverage against a range of perils such as Fire, Explosion/Implosion, Earthquake, Terrorism, Storm, Tempest, and Floods Inundation. Thus, Fire Insurance Coverage is not restricted only to fire coverage. You can read our detailed blog post on coverages in a Fire Insurance Policy to learn more.

Given the varied nature of manufacturing operations, there are different types of factory insurance policies that are suitable for different types of factories. Some policies will be suitable for warehouse stock insurance (inventory stock stored in warehouses) while other policies will be suitable for multiple manufacturing sites.

What are the Different Types Of Fire Insurance Policies in India?

The various types of fire insurance policies are as follows:

1. Stock Declaration Policy

A Stock Declaration Policy is provided by attaching a declaration clause to a Standard Fire Insurance Policy when there are frequent fluctuations in stock values at the Insured Godowns. This Policy is only given with a minimum Policy Sum Insured of Rs1 crore. An advantage of the Stock Declaration Policy in Fire Insurance is that it allows a maximum refund of 50% if the Declared Sum Insured is less than the Policy Sum Insured.

2. Floater Policy

Factory Owners can choose a floater policy when their inventory stocks are stored at different specified locations and insured under a single Sum Insured under the Policy. A Floater Policy allows the factory owner to ensure the goods are at different warehouses together under a single policy and a single Sum Insured.

Another advantage of a Floating Policy in Fire Insurance is that the Insured need not separately declare the value of stock at each location but he can declare a single value for the total stock value at all the specified locations declared under the Policy.

3. Floater Declaration Policy

A Floater Declaration Policy in Fire Insurance is given to owners who store their goods at different warehouses across the country and there are frequent changes in stock value throughout the year. The minimum Sum Insured required for this policy is Rs2 crores. This type of Policy requires the Insured Party to make monthly declarations for the overall stock value for all locations and also allows a refund of up to a maximum of 20% of the premium paid if the yearly average of stock values is lower than the Policy Sum Insured.

4. Agreed Value Policy

An agreed-value policy is different from other types of fire insurance policy in that it does not work on the principle of indemnity. Under an agreed value policy, the value of the goods to be insured is pre-decided and this is the value that the Insurance Company will be liable to pay if the Insured good is damaged or destroyed. Agreed Value Policy is issued only for Properties whose market values are difficult to determine such as Artworks, Curios, Manuscripts, or obsolete machinery.

5. Business Interruption Policy

A Business Interruption Insurance Policy is a very important addition to a normal fire insurance policy and it pays for the loss of gross profit faced by the factory owner when the plant and machinery in the factory is destroyed by an insured peril. A Business Interruption Policy will help to cover fixed charges such as Interest Payments on Loans, Employee Salaries, etc as the factory won’t be earning any revenue when it is damaged in a Fire Accident.

6. Average Policy

An Average Policy in Fire Insurance will have an average clause applicable to the fire policy. The average clause in the Fire Insurance Policy will come into play when the Insured Party has underinsured the property by declaring a lower Sum Insured than the actual value of the property that is to be insured. As a result, the insurance company is denied its rightful premium since it charges a premium on the lower sum insured which is declared.

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