Add-On Covers in Fire Insurance
Every SFSP exclusion has a matching add-on. Learn the gaps and you know the covers.
An add-on cover is an extension bought for extra premium that either adds a peril the base policy excludes or lifts a limit the base policy sets. On a fire policy the logic is simple: read the SFSP's exclusions, and almost every one of them has a matching add-on. Learn the exclusions and you have learnt the add-ons.
IRDAI's 2024 master circular on general insurance requires insurers to let customers customise cover through add-ons, and the premium for each add-on chosen by a retail customer must be shown separately. Rates and exact wordings are filed by each insurer, so the IC-11 questions stay at the level of which add-on fills which gap.
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Add-Ons Matched to the Gaps They Fill
Each row starts from what a typical SFSP wording leaves out.
Earthquake (fire and shock)
Gap in the base SFSP
Earthquake, volcanic eruption and other convulsions of nature are a general exclusion, and STFI damage resulting from earthquake is excluded too
Who typically buys it
Anyone in a seismic zone; banks often insist on it for financed property
Terrorism
Gap in the base SFSP
A terrorism damage exclusion warranty removes all terrorism loss
Who typically buys it
Large industrial and commercial risks, malls, hotels
Spontaneous combustion
Gap in the base SFSP
The fire peril excludes goods damaged by their own fermentation, natural heating or spontaneous combustion
Who typically buys it
Coal yards, cotton, oilseed, fertiliser and grain stores
Forest fire
Gap in the base SFSP
Bush fire is covered, forest fire is excluded
Who typically buys it
Plantations, resorts and factories near forests
Impact damage by own vehicles
Gap in the base SFSP
Impact by the insured's own vehicles or animals, or an employee's, is excluded
Who typically buys it
Warehouses and plants with heavy internal vehicle movement
Architects', surveyors' and consulting engineers' fees
Gap in the base SFSP
Covered only up to 3% of the claim
Who typically buys it
Large buildings where rebuilding needs design work
Removal of debris
Gap in the base SFSP
Covered only up to 1% of the claim
Who typically buys it
Plants where clearing a burnt site is costly
Temporary removal of stocks
Gap in the base SFSP
Property elsewhere is excluded, apart from machinery away for repair for up to 60 days
Who typically buys it
Textile units sending fabric to job workers for processing
| Add-on | Gap in the base SFSP | Who typically buys it |
|---|---|---|
| Earthquake (fire and shock) | Earthquake, volcanic eruption and other convulsions of nature are a general exclusion, and STFI damage resulting from earthquake is excluded too | Anyone in a seismic zone; banks often insist on it for financed property |
| Terrorism | A terrorism damage exclusion warranty removes all terrorism loss | Large industrial and commercial risks, malls, hotels |
| Spontaneous combustion | The fire peril excludes goods damaged by their own fermentation, natural heating or spontaneous combustion | Coal yards, cotton, oilseed, fertiliser and grain stores |
| Forest fire | Bush fire is covered, forest fire is excluded | Plantations, resorts and factories near forests |
| Impact damage by own vehicles | Impact by the insured's own vehicles or animals, or an employee's, is excluded | Warehouses and plants with heavy internal vehicle movement |
| Architects', surveyors' and consulting engineers' fees | Covered only up to 3% of the claim | Large buildings where rebuilding needs design work |
| Removal of debris | Covered only up to 1% of the claim | Plants where clearing a burnt site is costly |
| Temporary removal of stocks | Property elsewhere is excluded, apart from machinery away for repair for up to 60 days | Textile units sending fabric to job workers for processing |
Covers That Change How Stocks Are Insured
Stock values move every week, so two add-ons deal with the problem of fixing a sum insured.
- Floater cover
- One aggregate sum insured floats over stocks at several declared locations, instead of a fixed amount at each. The insured must keep records good enough to show the amount at each location at any time. A Surat trader with grey cloth in three godowns uses it.
- Declaration policy
- The insured fixes a maximum sum insured, pays a provisional premium, and declares the stock value each month (the daily average or the month's highest, as agreed). At expiry the premium is adjusted on the average declared value. In one insurer's Bharat Laghu wording the refund is capped at 50% of the provisional premium, a missed declaration is treated as the full sum insured, and under-declaration cuts the claim in proportion.
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Bharat Products Build Several of These In
The Bharat Sookshma and Laghu Udyam Suraksha products, and Bharat Griha Raksha for homes, list earthquake, forest fire and terrorism (on the terms of a terrorism clause) among their insured events, and cover fire including spontaneous combustion. They also build in higher professional-fee and debris limits than the SFSP, and cover additions made during the year. So a question asking what must be bought as an add-on usually has the SFSP in mind, not the Bharat products.
For homes, the master circular separately requires that a stand-alone fire-only homeowner policy give the option to add earthquake, cyclone and storm, flood, lightning, landslide, explosion of domestic pressure vessels and terrorism, or to exclude them.
How IC-11 Tests This
The question names a loss and asks whether the base SFSP pays. A heap of damp coal that self-ignites, a timber yard caught by a forest fire, a forklift belonging to the insured hitting a wall: all are outside the base policy and need an add-on. The trap is "bush fire": that one is a named peril and needs no add-on.
FAQs
What are add-on covers in fire insurance?expand_more
Optional extensions bought for extra premium that add a peril the standard fire policy excludes (earthquake, terrorism, spontaneous combustion, forest fire) or raise a limit it sets (architects' fees, debris removal, temporary removal of stock).
Is terrorism covered under a fire policy?expand_more
Not under the base SFSP, which carries a terrorism damage exclusion warranty. It is added back as a terrorism add-on. The Bharat products list terrorism as an insured event on the terms of an attached terrorism clause.
What is a declaration policy in fire insurance?expand_more
A stock policy where the insured pays a provisional premium on a maximum sum insured, declares the actual stock value every month, and has the premium adjusted at the end of the year on the average declared value.
Does the fire policy cover spontaneous combustion?expand_more
The SFSP excludes goods damaged by their own fermentation, natural heating or spontaneous combustion, so it needs an add-on. The Bharat Sookshma and Laghu wordings include it within the fire peril.
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