Owning a property portfolio comes with responsibilities. With Grenfell Tower still fresh in our minds, as a landlord, you are duty-bound to protect your tenants and your property from fire-related incidents.
When purchasing insurance, always ask if it covers fire damage. While it is essential for landlords to be covered for fire damage insurance, it is also necessary to have some basic understanding about fire damage insurance.
What does the insurance entail?
It can be quite frustrating applying for an insurance claim only to discover that your policy does not cover certain risks. Does insurance cover fire damage only? What else does fire damage insurance cover? These are some questions you will be to answer at the end of this post.
Types of Fire Damage Insurance Covers
There are several types of fire insurance policies. The insurance policy you choose should depend on the property you are insuring, as well as the value of the property. Fire damage insurance can be purchased for buildings, plants and machinery, fixtures or furniture.
Fire Damage Insurance Plans
If you have previously insured your business or asset, you may be familiar with the types of plans used in offering compensation, as well as the fire insurance claims procedure. The two main compensation schemes are: Actual Cash Value and Replacement Cost.
Actual Cash Value Vs. Replacement Cost
Most insurers prefer paying compensation based on the actual cash value as opposed to the replacement cost of the damaged property. In this case, actual cash value will be determined after depreciation deductions from the replacement cost. If you choose to insure your property against fire damage through cost replacement, then the cost of replacing your damaged property with a similar one shall be incurred solely by your insurance company. Although the replacement cost plan is more costly than actual cash value, it is more feasible in the event of an incident.
Custom Fire Insurance Plans
Did you know you can customise your insurance cover? Yes, it is possible to make arrangements with your insurer to get customised fire damage insurance cover. Insurance experts and property management professionals at Denhan agree that a customised insurance cover is more feasible than ordinary policies. This will allow the inclusion of profit losses.
Tenure or Duration of Fire Damage Insurance
Unlike other insurance covers, property insurance taken by landlords extends to periods of more than one year. The minimum duration for a building fire damage insurance is three years.
Risks Insured Under A Fire Damage Insurance
If you are planning to get insurance cover (which you should), you must know what risks will be covered under the policy. A fire damage insurance policy covering a wide range of risks can be referred to as a Standard Fire Policy. This policy covers the following risks:
- Fire – A fire being the primary incident must be insured in the cover. Fire damage insurance will provide you with cover against any damage resulting from fire-related incidents, which your insurer should explain before you sign the contract. It is worth noting that an insured property destructed by natural heating, combustion or self-fermentation will not be compensated under this cover. You’ll be required to make other arrangements in case of such an occurrence. Similarly, an insured property that has been ravaged by fire due to an order issued by a Public Authority is exempt from fire damage insurance.
- Lightning/Explosion/Implosion – Fire damage insurance will cushion your property losses resulting from lightning. Extreme lightning conditions can cause fires or damages in the form of cracks in a building. Although fire insurance cover shields you in the case of an explosion, this cover will not include the destruction of boilers, economisers, or any vessel used to produce steam. For these cases, you will need to purchase a Boiler and Pressure Plant Insurance Policy.
There are several other risks your fire damage policy can cover. These include:
- Aircraft Damage (Except damage caused by pressure waves generated when an aircraft flies at a supersonic speed?
- Subsidence and Landslide
- Bursting of Water Tanks
- Missile Testing
- Bush Fires