FIRE INSURANCE SECTION-1 GENERAL RULES AND REGULATIONS

FIRE INSURANCE GENERAL RULES AND REGULATIONS 

(1) POLICY

a) Only Standard Fire and Special Perils Policy (hereinafter referred to as Policy) with the permitted “Add-on covers (as appearing under Section Vill) if any, can be issued.

Note:-Unless otherwise specifically provided for, this Tariff is applicable to land-based properties only. b) The wordings of the Policy shall be as shown in Section II of the Tariff.

c) Policy should be read together with proposal form(s). schedule, specification, endorsements, warranties and clauses as one contract.

d) Policy covering Buildings and/or contents shall show blockwise separate amount on (1) Building (11) Machinery and Accessories (II) Stock and Stock-in-Process and (iv) Furniture and other contents. (unless otherwise specificallely provided).

e) It is permissible to exclude Storm, Tempest, Flood and Inundation group of perils (hereinafter referred to as STFI) and/or Riot, Strike, Malicious Damage and Terrorism Damage perils (hereinafter referred to as RSMTD) at Inception of the Policy only by deleting the relevant perils from the policy. The deletion shall apply for the entire property in one complex/compound/location covering the entire interest of the Insured under one or more Policy without any option for selection. Reduction in premium rates for such deletion(s) may be allowed as shown under the relevant sections of the Tariff. When these perils are deleted from the scope of the policy, the general exclusions shall include these perits.

f) Any risk, which has not been provided for in the Tariff, shall be referred to the Committee for rating. Provisional rate of Rs. 2.50 per mille shall be charged in such cases for covering the risks under Standard Fire and Special Perils Policy. No discounts and/or agency commission shall be allowed on this rate.For add-on covers, additional rates provided in section VIII shall be charged.

g) Rates shown under this tariff are minimum rates. Insurers may charge rates higher than those given under the Tariff.

(2) VALUED POLICY

Valued Policy(ies) can be issued only for properties whose Market Value cannot be ascertained e.g Curios, Works of Art, Manuscripts, Obsolete machinery and the like subject to the valuation certificate being submitted and found acceptable by the insurers.

(3) LONG TERM POLICIES

Policies for a period exceeding 12 months shall not be issued except for “Dwellings”.

(4) MID-TERM COVER

Generally, it is not permissible to grant mid-term cover for STFI and or RSMTD perils (Riot & Strike, Malicious damage & Terrorism).

The following provisions shall apply, where such covers are granted mid-term:

a) The premium rates as decided shall be charged on short perlod scale on full Sum Insured at one complex/compound/ location covering the entire interest of the insured for the balance period i.e. upto the expiry of the policy.

b) Insurers must receive specific advice from the insured accompanied by payment of the required additional premium in cash or by draft. This additional premium shall not be adjusted against existing Cash deposits or debited to Bank guarantee.

c) Mid-term cover shall be granted for the entire property at one complex /compound/location covering the entire interest of the Insured under one or more policy. Insured shall not have any option for selection.

d) Cover shall commence 15 days after the receipt of the premium.

(5) MID-TERM REVISION IN SUM INSURED:

Mid-term revision in sum insured shall be allowed as follows:

  • Increase in sum insured: On pro-rata basis
  • Decrease in sum insured: On short-period scale

(6) PAYMENT OF PREMIUM

Premium shall be paid in full and shall not be accepted in instalments or by deferred payments in any form.

N.B: It is not permissible to split sum insured of the same property under various policies for different periods of insurance to derive advantage of deferred instalments for payment of premium. Notwithstanding the above, different policies may be issued for stocks where circumstances necessitate issuance of such policies.

MINIMUM PREMIUM

(7) MINIMUM PREMIUM

Minimum premium shall be Rs.100 per policy except for risks ratable under Section III and Tiny Sector Industries’ under Section IV where the minimum premium shall be Rs.50 per policy.

(8) PARTIAL INSURANCE

It is not permissible: (a) to issue a policy covering only certain portions of a building. Notwithstanding this, the plinth and foundations or only the foundation of a building may be excluded. (b) to issue a policy covering only specified machinery (except Bollors), parts of the same block/building.

(9) LOADING FOR “KUTCHA” CONSTRUCTION

Building(s) having walls and/or roofs of wooden planks/thatched leaves and/or grass/hay of any kind/bamboo/plastic cloth/asphalt cloth/canvas/tarpaulin and the like shall be treated as ‘Kutcha’ construction for rating.

An additional rate of Rs.4.00%o shall be charged for such building(s) and/or contents thereof.

Note: Temporary sheds (attached to buildings) erected during the monsoon solely for the purpose of monsoon protection are permitted without loading provided such sheds are not used for storage purpose.

(10) RULES FOR CANCELLATIONS

For Cancellation of Insurance policy at the option of the insured:

a) Retention of premium shall be at Short Period Scale for the period the policy has been in force, subject to the retention of minimum premium by the Insurer.

b) During the currency, if a policy is replaced with the same insurer by a new annual one covering the identical property, refund of premium may be allowed on pro-rata basis at the original rates for the sum insured replaced.

c) For the sum insured not replaced, refund must be calculated after charging premium at short period scale on such sum for the time the insurance has been in force subject to retention of the minimum premium by the insurer.

d) In case of short period policies, premium shall be retained at the applicable short period scale.

N.B.: In case a policy is cancelled on account of a Government Order or on completion of a “Building in course of construction” or where Buildings are demolished: pro-rata refund of premium may be allowed.

N.B.: For Cancellation of insurance policy at the option of the insurer: Refund of premium shall be on pro-rata basis for the unexpired term.

(11) ESCALATION CLAUSE: (Also Refer Sr. No 17 in Sec. VIII)

It will be in order for Insurers to allow automatic regular increase in the Sum Insured throughout the period of the policy in return for an additional premium to be paid in advance. The terms and conditions for this extension shall be as follows.

a) Escalation Clause will apply to policies covering Building, Machinery and Accessories only and will not apply to policies covering Stock.

b) The selected % increase shall not exceed 25% of the Sum Insured.

c) The additional premium, payable in advance, will be at 50% of the full rate, to be charged on the selected % increase. The Sum Insured at any point of time would be assessed after d)

e) application of the Escalation Clause. Escalation Clause will apply to all policies and is not restricted to

policies issued on reinstatement value basis.

f) Pro-rata condition of Average will continue to apply as usual.

g) The automatic increase operates from the date of inception upto the date of operation of any of the Insured Perils.

Note: Refer endorsement wording, under ‘Add On’ cover.

(12) FLOATER POLICY:

Floater Policy can be issued for stocks various locations under one Sum Insured (The Standard Floater Clause I, Annexure A shall be attached to such policies).

Rating: the rate shall be the highest rate applicable to insured’s stocks at any location with a loading of 10%.

a) Unspecified locations shall not be allowed/covered.
b) In case Stocks in a process block are covered under the Floater Policy and the rate for the process block is higher than the storage rate, the process rate plus 10% loading shall apply. c) Presence of Kutcha construction may be ignored.

d) If stock situated within Godowns/Process Blocks in the compound are covered under floater policy, no floater extra is same chargeable.

(13) DECLARATION POLICIES

To take care of frequent fluctuations in stocks/stock values, Declaration Policy(ies) can be granted subject to the following conditions (Standard Declaration Clause J, Annexure A shall be attached to such policies):

a) The minimum sum insured shall be Rs 1 crore in one or more locations and the sum insured shall not be less than Rs.25 lakhs in atleast one of these locations.It is necessary that the declared values should approximate to this figure at sometime during the policy year.

b) Monthly declarations based on a) the average of the values at risk on each day of the month or b) the highest value at risk during the month shall be submitted by the Insured latest by the last day of the succeeding month. If declarations are not received within the specified period, the full sum insured under the policy shall be deemed to have been declared.

c) Reduction in sum insured shall not be allowed under any circumstances.

d) Refund of premium on adjustment based on the declarations/cancellations shall not exceed 50% of the total premium.

e) The basis of value for declaration shall be the Market Value anterior to the loss.

f) It is not permissible to issue declaration policy in respect of

  • Insurance required for a short period.
  • Stocks undergoing process.
  • Stocks at Railway sidings

g) If after occurrence of any loss, it is found that the amount of last declaration previous to the loss is less than the amount that ought to have been declared, then the amount which would have been recoverable by the insured shall be reduced in such proportion as the amount of said last declaration bears to the amount that ought to have been declared.

(14) FLOATER DECLARATION POLICIES

Floater Declaration policy(ies) can be issued subject to a minimum sum insured of Rs. 2 crores and compliance with the Rules for Floater and Declaration Policies respectively except that the minimum retention shall be 80% of the annual premium. (Standard Floater Clause I and Declaration Clause-J, Annexure A shall be attached to such policies):

Excess: Minimum deductible will be, 5% of claim amount Subject to a minimum of Rs. 50,000. (Cir.No. HO:FTD.12 w.e.f.27-7-2012)

(15) CLAIMS EXPERIENCE DISCOUNT/LOADING (on merit basis by Co.)

a) In case the claim experience exceeds 200% additional excess of 2.5% of the claim amount of each and every claim subject to minimum of Rs. 10,000 shall apply (i.e. minimum total excess of Rs. 20,000)

b) The above loading will not be applicable for Dwellings.

c) In the event of the insured transferring his insurance on renewal from one insurer to another insurer, the transferee insurer may allow claims experience discount/loading on the basis of the claims experinece details from the previous insurer(s). Evidence of the insured’s entitlement for claims experience discount/loading in the form of a letter confirming the claims experience details from the previous insurer(s) will be required for this purpose.

(16) FIRE EXTINGUISHING APPLIANCES DISCOUNT (FEA)

(17) RATING OF RISKS IN MULTIPLE OCCUPANCY INDUSTRIAL ESTATE

Risks in Multiple Occupancy Industrial Estate shall be rated ‘Per se. If the entire building of the Industrial Estate is insured under one sum insured, a rate of Rs. 1.80%o shall be chargeable to “building”.

(18) SILENT RISK

Risks rateable under Sections IV and V are allowed silent rates as per the following table.

Factories where no manufacturing/storage activities are carried out continuously for 30 days or more:- Retention of the premium shall be based on the appropriate storage rate or silent risk rate Re. 1.00% to be charged.

N.B.: The reduction in premium rates for deletion of STFI and RSMTD Perils at the inception of policy only in section IV & V. (Ref.:FT-22-2001 Dt. 12-11-01)

The silent rates are not applicable if a risk goes silent following a loss under the policy.

Risks becoming silent shall not be entitled to any discounts.

(19) VOLUNTARY DEDUCTIBLES

On receipt of application from the insured, Insurer may consider suitable discounts for voluntary deductibles as per the scale shown in the table below. The discounts are applicable under the Standard Fire and Special Perils Policy as well as for the Add-on Covers.

The Insurer shall attach to the policy(ies) a suitable clause in case the insured opts for the deductible and discount in the premium as shown in the table.

For endorsement wording see Clause K, Annexure A.

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