What is the purpose of fire and special perils insurance?
The purpose of fire and special perils insurance is to compensate the insured in the event of property damage.
A standard fire policy windows be extended to include ‘special perils’. These can be grouped under four broad headings:
- Perils of a chemical type
- Social perils
- Perils of nature
- Miscellaneous perils
What are perils of a chemical type on a fire policy?
Damage to the insured property by:
- spontaneous fermentation or heating - these perils are excluded under standard damage cover; and
- explosion - this extends the basic policy cover explosion, but still excludes damage caused by explosion of the insured’s own steam boilers and other pressure vessels and damage caused by sonic bangs
What are social perils on a fire policy?
Damage to the insured property by:
riot or civil commotion - including strikes and malicious persons acting on behalf of any political organisation. Excludes damage because of cessation of work and confiscation, requisition or destruction of property by order of the Government or any public authority; or
malicious persons who are not politically motivated. This cover excludes theft damage (covered separately under the theft peril) and damage while the building is empty and not in use. It is only available as an extension to the riot peril and is always subject to an excess.
What are the perils of nature on a fire insurance policy?
Damage to the insured property by:
storm - damage to moveable property in the open and fences and gates is excluded, as are risks such as lightning, flood and subsidence which can be insured as separate perils;
flood - this cover is only granted in conjunction with storm, in which case the flood exclusion is removed from the joint peril;
earthquake - cover is for shock risks, or fire and shock risks;
subterranean fire; and
subsidence, ground heave and landslip - a large excess applies (a minimum of £1,000) and the cover excludes: specified external property (e.g. car parks, walls) unless the insured building is also damaged; normal settlement of new structures; defective design, work or materials; coastal or river erosion; perils which should be insured elsewhere (e.g. fire, escape of water, explosion), or which originated prior to inception; and damage resulting from demolition, construction, alteration, repair, groundworks or excavation.
What are the general exclusions of a fire insurance policy?
In addition to the specific exclusions that relate to individual perils, a range of general exclusions apply to all sections of the fire and special perils policy (and to the all risks policy discussed next).
The main examples are:
- riot or civil commotion (unless insured as a special peril);
- war risks;
- radioactive contamination / explosive nuclear assemblies;
- terrorism;
- riot, civil commotion and associated malicious damage in Northern Ireland;
- pollution or contamination, except where a connected insured peril operates;
- risks which are or should be insured under a marine policy;
- items more specifically insured elsewhere; and
- consequential losses.
What is all risks insurance and what are the exclusions?
All risks insurance was developed to give broader cover than a standard fire and perils policy.
Despite its name, it does not cover all risks, but covers accidental loss or destruction of or damage to the property insured, unless specifically excluded.
There are no optional extensions to these policies, but several exclusions apply and these fall under four main headings:
- absolute exclusions (the standard market exclusions);
- exclusions where cover can sometimes be included with careful underwriting;
- exclusions where cover can be included for an additional premium; and
- risks more appropriately insured under other policies.
What does commercial theft insurance cover?
Commercial theft insurance covers property which has been stolen, but usually only where force is used for exit or entry.
What are the optional extensions that exist for commercial theft insurance
Breakage of glass
- Limited to glass breakage following or during theft or attempted theft, but only if glass is not insured under a separate/specific glass policy
Replacement of locks
- Costs incurred in replacing locks following the theft of keys
Temporary removal
- Items (other than stock) temporarily removed for cleaning or repair, but remaining in GB and NI
Index-linking
- Ensures that sums insured are kept reasonably up to date, in line with Retail Prices Index (RPI)
What are commercial theft insurance exclusions?
The standard market exclusions for property insurance policies, such as war and radioactive risks, apply to theft cover but further exclusions specific to this cover include:
- collusion
- fire and explosion
- cash and banknotes
- livestock
Cover under a commercial theft policy is often requested on what basis?
A first loss basis
What is a first loss basis?
This means that the policyholder chooses a sum insured which represents the maximum amount they consider could be lost in a single incident, recognizing that the thief will be selective in what they steal. The insured then benefits from a small premium discount.
How does glass insurance work with a commercial package policy?
Glass insurance is commonly provided as part of a commercial package policy.
A standard glass policy covers destruction of, or damage to, all fixed glass.
Cover is on an ‘all-risks’ basis and includes the cost of boarding up until the broken glass can be replaced.
What is money insurance?
Money insurance is designed to cover all risks of loss, destruction or damage of or to money (defined as cash, bank and currency notes, cheques, postal and money orders, postage stamps, National Insurance cards and luncheon vouchers).
Cover applies whether this money is:
- in transit, or being carried by the insured or their employees;
- on the insured’s premises during business hours;
- in a bank night safe;
- in a locked safe or strong room out of business hours (for large amounts insurers will want to approve the safe);
- on the insured premises out of business hours but not in safe (a low limit of, say, £500 will normally be specified);
- in the private residence of the insured or an employee (again with a low limit);
- in the custody of collectors or travelers while in transit, usually within a time limit, say 24 hours of collection; and
- in the custody of a professional carrier or security company.
The cover includes damage to safes or strong rooms caused during theft or attempted theft.
What are optional extensions to money insurance?
Personal accident and assault
- Pays compensation to employees who are injured in a robbery or attempted robbery. Cover may be extended to include damage to clothing and personal effects.
Credit cards
- These are not covered as standard, but fraudulent use by unauthorized persons can be included as a policy extension.
What are the specific exclusions of money cover?
The specific exclusions for money cover are:
- loss due to an error or omission in accounting/counting/book-keeping;
- loss due to the dishonesty of an employee, not discovered within seven days;
- loss, destruction or damage arising outside Great Britain, Northern Ireland, the Isle of Man or the Channel Islands; and
- loss resulting from the safe or strong room being opened by a key or by using the combination to a safe where this has been left on the insured’s premises while closed for business.
