Deciding on the Sum Insured Under Fire Insurance Policy
- Author :
- TATA AIG Team
- ●
- Last Updated On :
- 30/09/2024
- ●
- 2 min read
Buying insurance must be an informed decision. You must know every aspect of your policy, be it the type of policy, the add-ons, coverage, or the sum insured. Especially when the policy is as important as a property fire insurance policy, you need to be extra cautious.
Deciding on the sum insured under a fire insurance policy is important because it ensures that your property is adequately protected in the event of a fire. Insufficient or inadequate insurance can leave you with substantial out-of-pocket expenses, whereas overinsurance can lead to unnecessary premium costs.
In this blog, we shall discuss how to evaluate your sum insured under the fire insurance policy.
Introduction to Fire Insurance Sum Insured
A sum insured or the fire insurance claim sum is the insurance company's monetary limit for a payable amount under the concerned policy. This means the company is liable to pay to the extent of the sum insured in case of losses caused due to a covered peril to the insured property.
In the case of fire insurance, the policyholder must consider all factors that could be affected by fire inclusively. That way, in case of complete damage, the policyholder can return to the financial situation they were in before the event.
Let us understand how you can evaluate the sum insured for a fire insurance policy.
Evaluating Sum Insured Under Fire Insurance Policy
Adequate choice of the sum insured is paramount. With property insurance policies like fire and burglary insurance, you need to be careful while choosing the amount of sum insured. Here are a few factors that should be considered while deciding and determining the sum insured under a fire insurance policy.
Stock
Most commercial properties consist of stock required to supply goods and services. This stock includes raw materials, work-in-progress, and finished goods. If the stock is placed in the insured property, it is at risk of being affected by fire. Calculate the total value and estimated market fluctuations and evaluate it at market value.
Building
The insured property's structure, including walls, roofs, fixed amenities, and flooring, is an integral part of it. Calculate the value of the built-up area and other constructional elements by evaluating them according to similar built-up properties and their value. Buildings are usually subjected to value determination using a depreciated value basis. It is recommended to exclude land value since it is immune to any fire perils.
Plant and Machinery
Machinery, fixtures, equipment, amenities, fittings, and plants are usually non-negotiable components of a commercial property. This makes them necessary parameters to calculate the sum insured for fire insurance. Assess the replacement cost of these elements or use the market price in order to conduct an appropriate valuation of the property.
Furniture
Furniture includes desks, chairs, cabinets, cupboards, and doors. Some commercial properties, like schools, use furniture for their primary utility purposes. It is important to consider this element while evaluating the property. Calculate the total replacement value of these items or the market price of the commodities to add to the fire insurance claim sums.
Other Important Items
Every business has its own important assets and properties that are crucial for its functioning. It can range from stored artwork in a gallery to valuable paper documents in a finance firm and computers in an accounting office to special cooking equipment in hotels. It is important to calculate the value of these items based on the agreed-value basis.
Ending Notes
As mentioned earlier, deciding on the right sum insured is extremely important while purchasing a fire insurance policy. Under or over insured may put you in a difficult position at the time of claim settlement or pay high premiums for a prolonged period.
Tata AIG offers two plans under the umbrella of fire and burglary insurance online. These plans offer coverage depending on your business’s needs.
Fire perils are severe, and businesses can have huge financial impact if not covered adequately. The sum insured helps you stand on your feet without compromising on the quality of the assets, and that too in a limited time.
Since Tata AIG offers a combination of fire policy and burglary insurance policy, you are protected against 12 essential perils of fire and the loss and damage caused by burglary.
FAQS
What kind of property can I protect with fire and burglary insurance?
If you own a property, such as a firm office, medical clinic, hotel, school, institution, medical store, building, household articles, industrial firm, etc., you can get fire and burglary insurance for it.
What are the benefits of getting fire insurance?
Fire insurance offers coverage for physical loss, business interruptions, cash loss, and overall damage caused by burglary and fire.
Disclaimer / TnC
Your policy is subjected to terms and conditions & inclusions and exclusions mentioned in your policy wording. Please go through the documents carefully.
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