Getting to Know About Fire Insurance

As the name suggests, a fire insurance is a general insurance product that provides protection or guarantees against damage to buildings or property caused by fire.  Not only that, but fire insurance also covers damage caused by being struck by lightning, explosions, being hit by airplanes, and damage due to smoke. 

This fire insurance product is usually also attached to property insurance products so that the risk coverage of protection becomes wider.  For example, fire and property insurance provides additional guarantees for the risk of damage caused by hurricanes, storms, floods & water damage, riots, strikes, evil deeds, and riots. 

The rules of the game of fire insurance refer to the Indonesian Fire Insurance Standard Policy (PSAKI) established by the Governing Board of the Indonesian General Insurance Association (AAUI) on June 8, 2005. 

The risks guaranteed in PSAKI are loss or damage to the property and/or interests insured that are directly caused by fire either due to lack of care from the insured or other causes of fire as long as they are not excluded in the policy.  For example, the spread of fire or heat that arises on its own or due to the nature of the goods themselves, short circuits, or other causes that are not excluded from the policy. 

In fact, loss or damage as a result of water and/or other tools used in an effort to contain or extinguish fires can also be covered by fire insurance. 

Meanwhile, the exceptions in the PSAKI are grouped into two parts, namely first, the exception in terms of the cause of loss or damage to property and/or the insured interest.  Secondly, exceptions in terms of property and/or interests.

The first exception  is that  in the event of the cause of loss or damage,  the fire insurance policy does not cover loss or damage to the property and/or insured interests which is directly caused by things like theft and/or loss; intentional acts by the insured; deliberate actions of  the other  party with the knowledge of the insured;  willful misconduct or negligence  by  the insured or the insured's representative;   forest, shrub, reed or peat fires;   nuclear reactions;    earthquakes,  volcanic eruptions or tsunamis; and any form of business disruption.    However, all forms of these causes can be guaranteed if they are expressly guaranteed in the policy with the expansion of a special guarantee. 

Other forms of causes of harm that are also not guaranteed are riots, strikes, obstruction of work, evil deeds, riots, people mobilization, expropriation of power, revolution, insurrection, military power, invasion, civil war, war and hostilities, treason, terrorism, sabotage and looting, t hit by vehicles, industrial smoke, landslides, floods, standing water, hurricanes or hurricanes, and debris clearance costs.

The second exception is loss or damage caused by the spread of fire or heat arising on its own or due to the nature of the goods themselves and the short circuit.  However, if these things are   expressly guaranteed in the policy through the expansion of special guarantees, these risks can be covered by fire insurance.

Furthermore, the general conditions regulated in the PSAKI are contained in 25 (twenty five) articles, namely the obligation to disclose facts, premium payments, risk changes, changed places and changed hands, the obligations of the insured in the event of loss and damage, the rest of the goods, claims for compensation, incorrect reports, losses on movable goods, pricing in terms of losses, and ways of settling and determining compensation.

Other general conditions are underpriced coverage, reimbursed costs, other coverage, double coverage indemnity, subrogation, own risk, indemnity payments, recovery of coverage price, loss of indemnity rights, currency, termination of coverage, return of premiums, disputes, and covers.

Related to the expansion of the PSAKI guarantee, this additional benefit will result in the emergence of additional premiums.  The basic guarantee of PSAKI can be expanded by the insurer by attaching or adding to the policy concerned the endorsement or clause of the expansion of the guarantee in question. 

Some of the expansions of  the PSAKI guarantee are the expansion of the short-circuit guarantee;  expansion of the self-burning guarantee (what arises itself); expansion of smoke guarantees;  expansion of lightning guarantee,  expansion of temporary branch in-out guarantee;  expansion of additional capital guarantees; expansion of the automatic extinguishing pipe leakage guarantee;  expansion of guarantees of public authority; expansion of the guarantee of riots, strikes, damage from evil deeds;  expansion of riots; expansion of floods, hurricanes, bodies and water damage; and expansion of landslides.

Premium rates for fire insurance are usually set in per mile per year. The amount of premium rate for this type of insurance is basically influenced by several factors, including the type of risk or occupation (use) of the object of coverage, the class of the building's construction, the distance of the separator with other objects, the number of dangerous goods with fire stored in the building, fire extinguishing equipment, the extent of the insurance coverage requested by the insured, and the term of coverage.

The premium is calculated based on the multiplication between the amount or price of coverage (the sum insured) listed in the policy and the tribe / rate that has been mutually agreed between the insurer and the insured.