Introduction to Fire Risks Insurance

What is property insurance?

Mankind’s material achievements have always been subject to different types of risks and incidents from the beginning of urban dwelling and particularly after the development of industry and technology. Fear from natural incidents and disasters such as fire, flood, earthquake, storm, volcano and the fear of losing wealth and properties that have been gained by human through a lifetime of attempt and effort, are the major factors that worry human and make him feel uncomfortable and insecure.
The human body needs a reliable and permanent support so as to be able to fight harmful incidents and natural catastrophes and disasters and to be compensated for the incurred damages. For this purpose, Bimeh Iran (Iran Insurance Co.) has exerted the utmost effort for growth and development of insurance industry in the country, and has provided appropriate insurance coverage to prevent the waste of national wealth and create an atmosphere of calm and tranquility which is prerequisite for economic growth and activity by compensating the losses and damages incurred by its citizens.

Fire insurance

Definition of Fire: This term means the fire that is rooted in an uncontrollable thermal source or leaves a controlled thermal source and has such a thermal power that expands and stretches out.
Fires are divided into domestic or controlled fire, and wild or uncontrolled fire.
Domestic fire is the same that is needed and used by humans such as heating fire, gas light and other useful purposes. On the other hand, if this fire deviates from its main origin and spreads, it is regarded as wild fire.
From technical terms and insurance encyclopedia, fire is burning of an inflammable object, or the process and act of burning something that is accompanied by burning. For this reason slow and flame-less burning (oxidation), change of color and smell, heating something, fermentation and grilling (foodstuff) are not regarded as the fire that is known dangerous and hazardous. In fire insurance policy, the term fire has been used to mean a risk that is created through heating, flame and burning and incur damages to properties (object of insurance). Therefore, exceeding the heat in the heating process leading to breakage of shop’s glasses or changing the color and smell of the commodities is not regarded as fire which is commonly believed or from the insurance point of view.

The object of Fire Insurance

The object of fire insurance is compensating for financial and material losses and damages that are incurred on movable and immovable assets and properties of the policyholder, whether real or legal entity, due to fire risk. Therefore, in fire insurance, financial damages instead of physical damages are covered. We should add that the insurers cover damage incurred on third party properties due to fire risk, which according to law makes the policyholder responsible together with the fire risk or separately through civil liability insurance policy.

Different types of risks covered in Fire Insurance

In fire insurance the covered risks have been divided into two groups as follows: Major risks and consequent additional risks. First, we define major risks.

Major Risks :In fire insurance three risks, namely fire, explosion and lightning are covered.

Definitions of Major Risks:

Fire :

Fire means combinations of any burning substance with oxygen. In another words, three elements, namely air (oxygen), flammable object and temperature are needed for creation of fire. In this method, the fire triangle is achieved and if one of the aforementioned three elements is absent, burning will not happen.
In order for the fire to expand, it should come out of its initial center. Here it is called uncontrolled fire, which could be covered under insurance.

Temperature :

It means a spark that creates fire or flame which is called the flash point. Therefore, fire includes a fire that comes from an uncontrolled thermal source and has such a temperature that it expands.
Change of nature or chemical change of some goods and materials due to fermentation or oxidation and/or hotness of objects due to heat (such as hotness of iron) or burning of objects in a controlled fire (falling of objects inside of the heating place), are not covered by insurance.

Explosion :

In fire insurance explosion means any type of sudden release of energy from gas or steam expansion. Explosion may appear in different forms but all of them have joint properties. The reason of each explosion is expansion of a great volume of gas or steam, which puts pressure on its surrounding objects under high pressure or heat, or chemical reactions and explodes it. Any explosion cannot be covered in fire insurance, such as nuclear explosions, and explosives. Some explosions will be insured according to special conditions and by considering additional insurance premium.

Lightning :

In fire insurance, lightning is discharge of electric load between two clouds, or between cloud and ground that is created due to two opposite loads. By lightning risks we do not mean only the damages incurred due to fire from lightning but we mostly mean direct damages due to lightning that is called cold lightning and is created without firing. Example: melting, bursting, and burning from the surface.
The lightning that hits near the engine or another car hits the electrical cables in the open air that transfers the electrical power to that engine or car and due to the great load caused by the lightning on the cable is transferred to the engine and damages the machinery of the car, such damages are not covered by the insurer. In summary, the damage that is incurred due to direct or indirect heat or due solely to its power, being the direct damage caused by lightning that are insured. But damages that are incurred due to electrical energy of lightning are the indirect damages which are not insured.

Additional or consequential risks:

In fire insurance, in addition to the above mentioned risks, the followings are also insured:

the damages due to earthquake, volcano risks, flood and overflow of sea, lake or river water, storm, land slide, avalanche, bursting of water pipes, wastes from rain water and snow-melt, crash of aircraft and helicopters, glass break, theft of properties and home furniture and many other risks should be insured in case of policyholder’s request. These are called additional risks and are insured as major risks.

Definitions of consequential risks:

Earthquake and volcano :

In earthquake insurance, the direct damage incurred on the buildings, such as residential, non-residential and industrial buildings, and their properties, appliances and tools are insured against earthquake or volcano.
In the meantime, the incurred damages should be created simultaneously with the mentioned incidents.

Flood and overflow of seas, lakes or rivers water:

Flood is defined as a sudden flow of surface waters out of natural route which is created due to rainfall, snow, river overflow or fracture of dams.

Storm, hurricane and whirlwind:

In storm insurance damages due to storm, hurricane and whirlwind are covered (in meteorology, when the wind’s speed exceeds 61 km/h it is regarded as storm).

Bursting of water pipes and damages due to snow and rain:

In this insurance coverage, damages incurred on the object of insurance such as buildings, assets and furniture (property) available in them due to bursting of water pipe and snow and rain damages are covered.

Aircraft and helicopter crash:

Damages due to aircraft and helicopter crash or fallout of objects or wastes (with the exception of bomb or explosives and other war tools) are insured up to the total amount. The rate charged by insurers for locations within 5 km of the airport is higher than outside the stated limit.

Breakage of Glass :

Damages due to breakage of glass installed in the insured’s building, whether residential or non-residential building due to accident and impact of external objects are covered. Glass is made in two forms: empty and leveled. Empty glasses are covered if they are installed.

Theft or Break-In insurance:

The insurer should compensate for damages due to loss or damage caused to the insured’s properties or assets that happen due to theft or break-in, up to the insured amount. The following cases are regarded as theft or break-in:
Climbing the wall where the insured’s properties or assets are kept or breaking the door or window and damaging walls and the likes to gain entry to the insured’s premises.
Opening the doors with forgery keys and tools that are not the usual implements for entering the premises.
Entering the place by threatening the policyholder or other family members or anyone coming to the defense of the policyholder.

Industrial Centers Fire Insurance Policy

Industrial centers include all foodstuff, beverages, tobacco products, textile, cloth, leather, wood, paper, cardboard, printing and bookbinding, chemical products, non-metal mineral products, basic metals and by-industries.
Building, installations, machinery, raw materials and contents of each of the centers may be insured in Bimeh Iran (Iran Insurance Co.) at the day current price against the risks of fire, explosion, lightning and all additional risks mentioned in the policy.