Step By Step Guide To Decide The Sum Insured Of Fire Insurance Policy for Your Office

Step By Step Guide To Decide The Sum Insured Of Fire Insurance Policy for Your Office

Your official property is vulnerable to disasters like burglary, accidental fire, and natural causes (i.e. storm, flooding, lightning strikes, etc.). Fire Insurance is the specially designed contingency plan that can be availed if you own a commercial building or run a business. The policy works as a cushion that absorbs your loss by reimbursing or sharing it with the owner of the lost stock or property.

Like most other insurance plans Fire Insurance as well requires you to decide the amount of maximum coverage you need; i.e. select the assets and properties you’d like to put under the umbrella beforehand, and then choose the total cover amount for them.

What Should You Put Under Fire Insurance?

You might relate to one of more of the situations below, and basis this count the assets to put under the fire insurance policy:

  • Operating office within own premises
  • Operating office in a rented premise
  • Own the building, but others operate offices in it

This is the first criteria defining the assets you can insure. Therefore, if you are running your office in a rented space, you can only insure any gadgets, furniture, or equipment you brought to this place, anything that belongs to the owner of the property will be insured by him/her.

Steps to Ensure Everything Gets Covered

  1. Decide what needs to be insured:

First of all, make a list of the contents that need to be insured. The sum insured will depend on the kind of business one is running or the contents one has in his office. It will also depend on whether one owns the whole commercial property or has a leased space in the same.

 

Examples Contents to be insured
Mr. Rohan Bhattacharya owns a newspaper office in a commercial complex. The office space owned, the press, the computers and technical know-how, machines and equipment, electrical sockets and air conditioners, important documents if any.
Mr. Srinivas has taken a furniture shop on rent in a mall.

 

Raw material (if any), finished stocks, paintings (if any), electrical equipment and machines.
Messrs KoBi Ltd. owns commercial complexes and malls which have leased out spaces for commercial operations. The Building structure which includes all electrical elements, doors and windows, the parking space, the boilers, air conditioners, the decorations or artistic works and the compound space and fences.
Suneeta Bilal, a fashion designer, has laid out a collection in a shop he owns with mannequins, designer dresses, electronic display units, chandeliers, etc. These will include all the fancy and decorative items with the stock in place, electrical equipment used in the office, computer, air conditioner, etc.

 

  1. Classifying Contents Based on their Insurable Value:

Sum insured of a property should generally represent its market value. However, based on the type of asset the insured value will keep changing year on year. Let’s look at the examples of the same:

Imagine that a machine which was purchased for Rs. 1 lakh. Now after 10 years, its market value after depreciation is Rs. 50,000.

  • Market Value: In case it is damaged and is insured for its market value (MV), then the insured party will receive only Rs. 50,000 in this case which will not even cover depreciation. (Second-hand machines and stocks including raw material, finished products are insured on MV)
  • Replacement Value: If it is insured on its reinstatement value (RIV), the insured will receive the expenses equal to the current market value (Rs. 1,50,000) of a similar new machine. Thus, the depreciation will also be covered, and the insured will remain in the same financial position as he was before the loss. New tools, furniture and fixtures and building structure can be valued at this rate to minimize loss
  • Declared or Agreed on Value: This can be used for valuable items like paintings, artworks, in which a renowned valuer will fix the cost of the damage to the said objects.
  1. Additional Risks:

Standard fire insurance policy covers many risks, but you might want to use some extra covers, for example: earthquake, terrorism, etc.

  1. Risks Not to be Covered:

Depending on your location and geographic area, certain risks specifically included in the fire policy may not apply. These can be removed, and help lower your premium cost for the policy. For example: Most of the Businesses located in mountainous region are free from the risk of flooding.

  1. Get the final quotes

The last step would be to get the quotes from various insurers and select the one that suits your requirements and is within your affordability. Get the sum insured increased or decreased with changes in the property structure and changes in the exchange rates.

There are more than 20 insurers providing fire insurance in India, and surely it can be difficult to finalize one without an expert assistance. Online insurance advisors like SecureNow, offer their full assistance, starting from the buying decision to the claim of such policies. They can provide multiple quotes from various insurers and assist you in following the steps suggested above so that you can relax with a sufficient safety cushion.

Editorial Team
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