Add-On Coverson STANDARD FIRE AND SPECIAL PERILS

POLICY

PRESENTED BY:-SANTHOSH YADAV DAGGULA

SAUMYA SAJIBSHEFALI

SHADDHA RATHORESIMRANJEET KAUR

Definition• Add on covers are extensions of the fire policy on

payment of additional premium and by attachment of endorsements. These extensions relate to additional perils or coverages.

• These are mainly of two types

Perils

Expenses

Why Add-ons ???

3

• Increase ticket size ~ increase commission

• Increase loyalty, easy renewals and increase in customer retention YOY

• Overall development of all sectors related to insurance like Manufacturers, Garages, Surveyors, Assistance service providers, medical service providers, IT solutions etc…

• Increase ticket size, increase top line

• Flexibility to differentiate its product from competitors

• Increase profitability

• Increase loyalty/ renewal and customer base

• Address specific customer needs

• Flexibility to customer to add value to existing coverage

• Complete coverage ~ less hidden out-of-pocket expenses

• Lifestyle & convenience with Security

CustomerInsurance company

Agent & IMDs

Other Third

parties

General Add on covers include Loss/ damage/ destruction of the property caused by

Perils

1. Deterioration of Stocks in Cold Storage premises due to power failure following damage due to an insured peril

2. Forest Fire

3. Impact Damage due to Insured's own Vehicles, Fork lifts and the like and articles dropped there from

4. Spontaneous Combustion

5. Omission to insure additions, alterations or extensions

6. Earthquake (Fire and Shock)

7. Spoilage material damage cover.

8. Leakage and contamination cover.

9. Temporary removal of stocks.

10. Terrorism

Expenses:

1. Architects , Surveyors and Consulting Engineer's Fees (in excess of 3% claim amount)

2. Debris Removal (in excess of 1% of claim amount)

3. Loss of rent.

4. Insurance of additional expenses of rent for alternative accommodation.

5. Start up Expenses

1. Deterioration of Stocks in Cold Storage premises due to power failure following damage due to an insured peril

• Special Exclusions

1). The Company shall not be liable for any loss unless the duration of each such failure exceeds 24 hours

2). The Company shall not be liable for any loss occasioned by the deliberate act of the Government, Municipal or Local Authority or Supply Authority not performed for the sole purpose of safeguarding life or protecting any part of the supply.

• In any action, suit or other proceedings where the company alleges that reason of this condition any loss or damage is not covered by this insurance, the burden of proving that this loss or damage is covered shall be upon the Insured.

Deterioration

of Stocks in

Cold Storage

premises due

to accidental

power failure

consequent to

damage at the

premises of

Power Station

due to an

insured peril

25%

of

Poli

cy

Rate

Sum

insure

d of

stocks

2. Forest Fire

The fire policy covers bush fire

but excludes forest fire. The

extension includes loss or damage

to the property insured directly

caused by burning, whether

accidental or otherwise, of forest

, jungles and clearing of lands by

fire.

Thepremium rate is Rs.5 per mille

Sum insured of stocks

3.Impact Damage due to insured own vehicle, fork lift and like article.

Impact Damage

due to Insured’s

own Rail/Road

Vehicles, Fork lifts,

Cranes, Stackers

and/or caused by

articles dropped

therefrom.

5% of Policy Rate Policy Sum

Insured

4. Spontaneous Combustion

• Combustion- a chemical process in which a substance reacts rapidly with oxygen and gives off heat. The original substance is called the fuel which can be a solid, liquid, or gas.

• Own fermentation, natural heating and spontaneous combustion are covered in this add on cover.

• The expression “by fire only” in the endorsement above must not be omitted under any circumstances

Spontaneous

Combustion

Category I goods

Category II goods

Category III goods

Category IV

goods

Rates

applicable

Rs.0.25%o

Rs.0.50%o

Rs.0.75%o

Rs.1.00%o

Sum

insured of

relative

commodit

y

5. Omission to insure additions, alterations or extensions

• The Insurance by this Policy extends to cover Buildings and/or Machinery, Plant hereof which the insured may erect or acquire or for which they may become responsible :-

a) at the within described premises

b) for use as factories

Omission to Insure additions, alteration or extensions.

5% of sum insured of BMA

Policy Rate

Special Conditions

i) The liability under this Extension shall not exceed in respect of(a) above, 5% of the Sum Insured by each item, in respect of (b) above, 5% of the Sum Insured.

ii) The Insured shall notify the Insurer of each additional insurance as soon as it shall come to their knowledge and shall pay the appropriate additional premium thereon from the date of inception.

iii) Following the advice of any additional insurance as aforesaid, cover by this extension shall be fully reinstated.

iv) No liability shall attach to the insurers in respect of any Building, machinery, Plant or other contents while such property is otherwise insured.

Notes-

1: If the insured fails to declare the values of such additions within 30 days after the expiry of the policy, there shall be no refund of the advance premium collected

2: ‘Contents’ in the above clause shall mean ‘Furniture and Fittings’ and does not include ‘Stocks’

3: This clause should be incorporated at the time of issuing the policy

6. Earth quake• The Insurance is extended to cover loss or damage

(including loss or damage by fire) to any of the property Insured by this policy occasioned by earthquake including Landslide / Rockslide resulting there from but excluding flood or overflow of the sea, lakes, reservoirs and rivers caused by Earthquake.

• Special conditions

1) Excess clause 5% of each and every claim subject to a minimum of Rs.10,000/.

2) Extension cover shall be granted only if the entire property in one complex / compound / location covered under the policy is extended to cover this risk and the Sum Insured for this extension is identical to the Sum Insured against the risk covered under main policy except for the value of the plinth and foundations of the building(s)..

• 3) Onus of proof- In the event of the Insured making any claim for loss or damage under this policy he must (if so required by the Company) prove that the loss or damage was occasioned by or through or in consequence of earthquake.

Earthquake (Fire and Shock) Zone I Zone II Zone III Zone IV

Rs.1.00%o Rs.0.50%o Rs.0.20%o Rs.0.10%o

Policy sum Insured

Note :- Dwelling, offices, hotels, shops etc rateable under Section III of the tariff can be covered by charging a uniform rate of Re 0.10%0 regardless of the zones

7. Spoilage Material Damage Cover :The cover shall extend to material damage, i.e.

• Loss of stock in process

• Damage to machinery, containers and equipment (including cost of removal of debris and cleaning) and shall be provided by a separate item of the SFSP

Spoilage

Material

Damage

Cover

Stocks in specified

blocks

5 times the Policy

Rate

Machinery,

Containers &

Equipments in

specified blocks

2.5 times the Policy

Rate

Value of stocks

in specified

blocks

M/A value in

specified blocks.

8. Leakage & Contamination Cover :

• Policy may be extended to include the risks of

(a) accidental leakage

(b) accidental leakage and contamination

• Special Exclusions when both leakage and contamination and only leakage is covered:

Contamination through Improper Handling or Controls by Insured’s own Employees

Resulting from loss of use, loss of earnings, delay or loss of markets or other consequential or indirect loss or damage of any kind or description whatsoever;

Leakage And

Contamination

Cover

Where the tanks

are within the

Insured’s own

premises

Where the tanks are

located elsewhere

Leakage

Cover

only

Rs.5%o

Rs.6%o

Leaka

ge &

Conta

minati

on

Rs.10

%o

Rs.12

%o

Specif

ied

sum

insure

d

Loss resulting from any kind of infidelity or dishonesty on the part of the Insured or any of their employees, inventory shortage, mysterious disappearance or unexplained loss.

Loss by burglary or theft or any attempt thereat

Resulting from shrinkage, evaporation, loss of weight unless caused by a peril not otherwise excluded.

Any legal and/or contractual liability arising from any cause whatsoever of any nature

9. Temporary removal of stocks.

• This extension does not apply to stock if it is insured.

• The pro-rata condition of average should be applied to the limit of stocks temporarily removed as well as to the total sum insured of such stock under the policy.

Temporary

Removal of

Stocks Clause

10% of

policy

Rate

Policy

sum

insured

10. Terrorism

• Covers the potential losses and liabilities that might occur due to terrorist activity.

• The sum insured opted for can include material damage & business interruption.

• The maximum aggregate loss may vary from company to company.

• The premium charged will vary based on the risk occupancy (i.e. industrial/non industrial /residential) and on the sum insured.

• Mid-term inclusion of terrorism coverage is not allowed.

Industrial Risks Non Industrial risks

Terrorism 0,25(upto 1000crs) 0.15 +0.08(Dwellings)

1. Architects, Surveyors and Consulting Engineers Fees ( in excess of 3% of the claim amount)

• The expenses incurred towards Architects, Surveyors and Consulting Engineers fees for plans, specification tenders, quantities and services in connection with the superintendence of the reinstatement for the Building, Machinery, Accessories and equipment insured under this policy upto 7.5% of the adjusted loss is covered.

• It is understood that this does not include any cost in connection with the preparation of the Insured’s claim or estimate of loss in the event of damage by insured perils”.

2. Removal of Debris (in excess of 1% of the claim amount)

• It covers the cost incurred by an insured in the removal of debris from the premises of the insured, following destruction or damage by Insured Peril by incorporating the following clause :

• On costs and expenses necessarily incurred by the insured

(a) The removal of debris from the premises of the Insured

(b) Dismantling or demolishing

(c) Shoring up or propping

3. Loss on rent

• In this add on, loss of rent caused by Insured Perils is covered, the following Rent Clause should be inserted in the Policy:-

• The insurance on rent applies only if

(any of) the said building(s) or any part thereof is unfit for occupation in consequence of its destruction or damage by the perils insured against

The amount payable shall not exceed such portion of the sum insured on rent as the period necessary to the term of the Rent Insured

Loss Of Rent clause Policy Rate Specified

sum

insured

4. Insurance of additional expenses of rent for alternative accommodation.

• Additional Rent: If the insured is the Owner-Occupant, the additional rent borne by him is arrived at after deducting the standard rent of the premises from the actual rent paid for the alternative accommodation. The standard rent shall be based on the rateable values fixed by the Municipal/Revenue authorities for tax purposes

• If the insured is a tenant only and for safeguarding his legal tenancy rights is obliged to pay rent for the premises even during the period when it is not fit for occupation, the additional rent borne by him is the actual rent for the alternative accommodation

• If the insured is a tenant and is not obliged to pay rent for the premises during the period when it is not fit for occupation, the additional rent borne by him is the actual rent paid for alternative accommodation taken less the rent which he was paying for the premises immediately prior to the same being damaged or destroyed by Insured Perils and rendered unfit for occupation.

• Additional expenses of rent for an alternative accommodation in respect of non-manufacturing risks may be covered on the following basis:

• A) The cover may be granted for non-manufacturing premises only

• B) The cover may be granted under the Policy and not under Consequential Loss (Fire) Policy

• C) The period of Indemnity may be limited to the period during which the original premises remain untenantable as a result of occurrence of perils insured against. Maximum indemnity period not to exceed 3 (three) years.

• D)The additional expense recoverable under the policy may be additional rent actually paid i.e. the difference between the new and the original rent only

• E) The cover may be limited to buildings other than those of“ Kutcha” construction.

5. Start up expenses

• In this add on, start up costs caused upon the loss or damage to the insured property, is covered

• The start up costs should be inserted in the Policy.

• These costs are necessarily reasonably incurred by the insured consequent upon a loss or damage covered by this policy.

Start up

Expenses

Policy

Rate

Specified sum

insured

Case study 1

• When the local council completely stopped access to Vinit’s lodge, his business naturally came to a grinding halt. A water pipe had broken in the street outside his lodge. What’s more, the water and electricity supplies had both been shut down for safety reasons. So there was no power, no water and no customers! Fortunately, Vinit had taken Standard Fire & Special Perils Policy with XYZ Insurance. Along with it he had extended the cover by taking add ons. This covered his loss of income and wages. It also helped him pay his outgoings while the lodge was closed. Happily, the closure only lasted a week and with the cash settlement from XYZ covering one week’s business interruption, Vinit hardly felt the pain at all.

• Which type of add on cover he took? Peril or expenses

• What is the coverage name of the add on?

Case study 2

• Mr. Ankit is a well known business man who owns no. of restaurant outlets in different places inside the country. Two years back he opened a new branch in Srinagar (J&K) observing the need of restaurant and high potential of business there. His Srinagar branch was doing very good business. One day morning he got an unexpected call from the manager of the restaurant informing him about J&K earthquake and his damages. As his restaurant has not incurred major losses as it was in away from big buildings and localities. Minor losses have occurred as the boundary wall broke and the materials inside the restaurant were damaged. He had taken Standard Fire & Special Perils Policy from ABC Insurance Company for his restaurant as it was highly prone to fire and related accidents. He had also taken no. of add on covers in the policy. His losses in form of breaking of boundary wall, debris removal and damage of the materials inside were covered . He was very happy as he had not incurred any loss due to the earthquake damage.

1. How many add on covers he had taken?

2. What were the names of the add on covers?

Case study 3

• Donna owned a Cyber Café which was doing quite well until heavy rain from a storm caused water damage to the café’s floor coverings. Donna had a Standard Fire and Special Perils Policy as the café was on a high risk of fire with IJK Insurance company. She had also taken earthquake add on cover in the policy. So she lodged a claim for the damage along with a quotation to replace the flooring. After gaining a little more information from Donna, IJK company had no hesitation in approving her claim. They were waiting on a report from a qualified repairer but took Donna’sword and paid the claim within five days of receiving it.

MCQs

1. Under which of the following conditions the fire policy will cease

a). Changes in trade or manufacture activities

b). Unoccupancy of the building for more than 30 days

c). Transfer of insurable interest unless by will or operation of law

d). All of the above.

2. Which of the following perils is an add-on cover under the Fire policy at extra premium?

a). Spontaneous combustion c). Flood

b). Impact Damage d). Explosion

MCQs

3. Is forest fire covered in Standard Fire and Special Perils Policy

a). Yes, it is covered

b). No, it is not covered

c). Yes, but with an add on cover

d). None of these

4. What % policy rate as temporary removal of stocks cleared as an add on cover?

a) 14 b) 12 c) 10 d) 8

Answers

1. D

2. A

3. C

4. C