Businesses can buy commercial property insurance regardless of whether they own, rent, or lease a building. For owners, the policy covers the building and its contents, including machinery, furniture and merchandise, while for rented or leased premises the insurance covers contents.
A single policy can cover a business with more than one location, unless they have different functions and risk profiles such as those with an administrative office and a separate factory, or multiple location operations.
All moveable/immoveable properties of the proposer on land (excluding those in transit) broadly categorized as follows:
Buildings (including plinth and foundations, if required):
- Whether completed or under construction (excluding the value of the land).
- Interiors, partitions and electricals.
Plant and machinery, equipment and accessories (including foundations, if required):
- Bought second-hand.
- Bought new.
- Obsolete machinery.
- Raw materials.
- Finished goods.
- In process.
- In trade belonging to wholesaler, manufacturer and retailer.
Other contents such as:
- Furniture, fixtures and fittings.
- Cables, piping.
- Spares, tools and stores.
- Household goods etc.
- To take care of frequent fluctuations in stock/stock values.
- Monthly declaration to be submitted before the last day of the succeeding month on the following basis:
- Average of the highest values at risk on each day; or
- highest value on any day of the month.
- Refund of premium on expiry of policy, based on the average declaration up to 50% of the provisional premium.
- To cater for frequent changes in values at various locations.
- Single sum insured for all stock in all locations.
- Nominal premium loading to cover all stocks in all locations.
- Explosion/implosion: sudden changes in temperature in any plant and machinery or exposure to atmospheric pressure that may result in loss.
- Aircraft damage: any damage to the property caused by anything falling from aircraft or by the aircraft itself.
- Riot, strike and malicious damage (hereinafter called RSMD perils): any damage to the property due to the actions of the public, strike by employees or intentional damage by any person.
- Storm, tempest, hurricane, cyclone, typhoon, tornado and flood inundation: damage due to storms (differently identified by wind speed) and floods (not only leakage of water from a river or water body but also accumulation of water in the premises due to heavy rains).
- Impact by any rail/road vehicle or animal not belonging to or owned by the insured or any occupier of the premises or their employees while acting in the course of their employment.
- Subsidence/landslide, including rockslide.
- Bursting and or overflow of water tanks, apparatus and pipes.
- Leakage from automatic sprinkler installation.
- Pollution or contamination resulting from any of the above perils.
- Any insured peril resulting from pollution and contamination.
Losses/expenses not covered:
- Loss of earnings, loss by delay, loss of market or other consequential or indirect loss or damage of any kind.
Perils not covered:
- War and allied perils.
- Ionizing radiation and contamination by radioactivity.
- Pollution or contamination.
- Items such as manuscripts etc., unless specifically declared.
- Cold storage stocks due to change of temperature.
- Loss/damage/destruction of any electrical and or electronic machinery, apparatus, fixture or fitting arising from over running, excessive pressure, short circuiting, arcing, self-heating or leakage of electricity, from whatever cause including lightning.
- Loss/damage/destruction of boilers, economizers or other vessels in which steam is generated and machinery or apparatus subject to centrifugal force, by its own explosion/implosion.
- Fire due to own fermentation, natural heating or spontaneous combustion of stocks.
- Burning by order of any public authority.
- Explosion of boilers or steam-generating vessels and machinery subject to centrifugal force by its own explosion or implosion.
- Pressure waves generated by aircraft.
- Total or partial cessation of work/retarding/interruption of any process or operations arising out of riot, strike or malicious damage.
- Burglary, housebreaking, theft, larceny or any malicious act.
- Impact damage by rail/road vehicles or animals belonging to the insured or employee or any occupier of the premises.
- Normal cracking, settlement, bedding down, upheaval of land/structures, coastal or river erosion, defective design, workmanship or use of defective materials.
- Destruction or damage caused by forest fire.
- Excess amount mentioned in the schedule/policy; i.e. the minimum amount of claim to be borne by the client.
- Loss or damage caused by war or warlike situations.
- Loss or damage by pollution or contamination except due to insured peril.
- Loss or damage to electrical machine/apparatus which is the source of a fire.
- Architects’, surveyors’ and consulting engineers’ fees exceeding 3% and debris removal expenses exceeding 1% of claim amount.
- Any consequential losses.
- The proposer shall describe all locations where the properties are built, installed, stored or kept at inception.
- Any change of location of risk shall be covered on intimation of such change.
- Change of ownership in the insured property shall be intimated so that the new owner may be covered by means of suitable endorsement.
- Any material change in the location of risk, trade or manufacturing activities shall be intimated to the insurer so that the changes may be endorsed to offer continuous cover.
Add on Covers
In addition to the perils/expenses covered, the proposer may seek to add cover in respect of the following perils/expenses at inception or during the course of the policy on payment of an additional premium:
Loss/damage/destruction of the property caused by:
- Deterioration of stocks in cold storage premises due to power failure following damage due to an insured peril.
- Forest fire.
- Impact damage due to the insured’s own vehicles, forklifts and the like, and articles dropped therefrom.
- Spontaneous combustion.
- Omission of additions, alterations or extensions.
- Earthquake (fire and shock).
- Spoilage material damage cover.
- Leakage and contamination cover.
- Temporary removal of stocks.
- Owners of buildings and their contents such as household articles, furniture etc.
- Educational/research institutions.
- Hotels, boarding and lodging houses, hospitals, clinics or such service providers.
- Industrial and manufacturing firms.
- Godown keepers.
- Bailees, lessors, lessees, banks, financial institutions, mortgagors, mortgagees.
- Traders in stocks.
- Trustees, charitable institutions.
- Transporters and C&F agents.
Insured Sum Selection
- The sum insured of a property should represent the market value.
- Where more than one building (and contents) are insured under a single policy, block-wise values shall be furnished in respect of building, plant and machinery, stocks and other contents.
The following guidelines, though not exhaustive, are provided to indicate the sums insured for various properties:
Base of Insurance
|a) Completed||Depreciated value basis||Estimated cost of reinstatement (material + Labor) of a similar property as on the date of proposal with suitable escalation for the policy period less depreciation for age.|
|Reinstatement value basis||Same as above but without depreciation, i.e. the policy will pay in the event of loss/ damage without any deduction for depreciation.|
|(b) In course of construction||Reinstatement value basis||Estimated total completed value (material + labor).|
Reinstatement value: in the event of loss, the amount payable is the cost of reinstating property of the same kind or type, by new property, i.e. “new for old.”
|Base of Insurance||Sum Insured|
|(a) Bought second-hand||Market Value||Estimated landed cost of replacement of a similar machine of the same kind and capacity as on the date of proposal with suitable escalation over the policy period less depreciation for age and usage for number of years from the date of manufacturing (and not from the year in which it was bought)|
|(b) Bought New||Market Value||Estimated landed cost of replacement of a similar machine of the same kind and capacity as on the date of proposal with suitable escalation for the policy period less depreciation for age and usage|
|RIV Basis||Estimated landed cost of a similar machine of the same kind and capacity as on the date of proposal with suitable escalation for the policy period|
|(c) Obsolete M/c.||Agreed Value||Value has to be ascertained by an expert valuer. The value so ascertained will be the agreed value between insurer and proposer and loss/ damage will be assessed on this basis|
Generally, the landed cost of an imported or indigenous machinery will include its prime cost, Customs Duty/Excise Duty, CV Duty, loading and unloading charges, freight, insurance, incidental expenses and cost of installation at site
Base of Insurance
|Raw material||Market value||Landed cost* at the time of proposal with suitable increase for inflation, if any.|
|Finished goods||Market value||Landed cost of raw materials at the time of proposal plus direct and indirect charges incurred for processing with suitable increase for inflation, if any.|
|Stock in process||Market value||Landed cost of raw materials at the time of proposal plus direct and indirect charges incurred up to the stage of processing with suitable increase for inflation, if any.|
|Manufacturer||Market value||Cost of raw materials plus manufacturing costs (direct and indirect charges) as on the date of proposal with suitable increase for inflation, if necessary.|
|Wholesaler||Market value||Landed cost at which the goods can be purchased from manufacturer as on the date of proposal with suitable increase for inflation, if necessary.|
|Retailer||Market value||Landed cost at which the goods can be purchased from wholesaler as on the date of proposal with suitable increase for inflation, if necessary.|
*Landed cost is prime cost plus all duties plus freight, insurance and incidental charges.
Base of Insurance
|Market value||Estimated cost of replacement of property of the same kind as on the date of proposal with suitable escalation for the policy period less depreciation for usage.|
|RIV basis||Estimated cost of Reinstatement of a similar property as on the date of proposal with suitable escalation over the policy period.|
Base of Insurance
|Agreed Value Basis|
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