January 4, 2022

Difference between SFSP, BLUS, and BSUS Insurance policies

Difference between SFSP, BLUS, and BSUS Insurance policies



Fire Insurance in India has been completely reformed post IRDAI’s (Insurance Regulatory and Development Authority of India) efforts in bringing Fire and Allied Perils Insurance business out of the ambit of the All India Fire Tariff, 2001.

For a long time insurance companies would offer only one Fire and Allied Perils Insurance product, namely the Standard Fire and Special Perils (SFSP) policy which would offer protection to all businesses and homes against a long list of perils, including fire, lightning, strikes, and over a dozen more.

However, with effect from 1 April 2021, Fire and Allied Perils Insurance in India is now offered in 4 distinct products. This was done to de-tariff the prices for certain businesses, particularly dwellings, micro level, and small level enterprises. The new products are :

  • Bharat Griha Raksha policy - this provides Fire and Allied Perils coverage to all residences / dwellings and housing societies within the country. Commercial enterprises are strictly kept out of the scope of this policy.
  • Bharat Sookshma Udyam Suraksha (BSUS) policy - this provides coverage to all businesses whose Sum Insured is not more than ₹5 Crore
  • Bharat Laghu Udyam Suraksha (BLUS) policy - this provides coverage to all businesses whose Sum Insured is more than ₹5 Crore but less than ₹50 Crore
  • Standard Fire and Special Perils (SFSP) policy - this old product is still offered but only for those businesses whose Sum Insured is more than ₹50 Crore

Let’s examine the differences between the three Commercial Fire Insurance products in detail. But before we begin, let’s lay down some important definitions :


  • Excess - Also known as ‘Deductible’, Excess is a fixed amount or a percentage of loss that is deducted before any claims settlement is made. Loss corresponding to the excess amount has to be borne by the insured
  • STFI cover - This cover in Fire and Allied Perils Insurance includes loss or damage due to Storm, Typhoon, Tempest, Hurricane, Flood, or Inundation
  • RSMD cover - This cover in  Fire and Allied Perils Insurance includes loss or damage caused by Riots, Strikes, or Malicious damage
  • Reinstatement Value - A method of claim settlement under a Fire Insurance policy where the damaged property or asset is simply reinstated by the insurer. This is done by considering the cost of replacing the damaged property with a new property of the same type. This cost is then paid to the insured as a claim amount
  • Market Value - A method of claim settlement under a Fire Insurance policy where the claim amount reflects the price that the damaged asset would command in a competitive and open market. Under this method claims are settled after deducting depreciation on the damaged asset / property.
  • Escalation Clause - Under this clause, the Sum Insured gradually increases to take into account unexpected fluctuations in the price of the insured asset. This is done to ensure that the business does not become underinsured and liable to bear excess losses

Criteria

BSUS

BLUS

SFSP

Value of total insurable assets at any one location

Less than ₹5 Crore

More than ₹5 Crore but less than ₹50 Crore

More than ₹50 Crore

Excess amount 

₹5,000

₹5,000

- For ‘Act of God’ perils, 5% or ₹10,000, whichever is lower


- For all other perils, ₹10,000

Covers for Forest Fires, Earthquakes, Volcanic Eruption and Terrorism

Offered as Standard covers

Offered as Standard covers

-Offered as add-on covers on payment of extra premium


-No cover for Volcanic Eruption

Flexibility in opting for (i) STFI, and (ii) RSMD 

These covers are fixed as standard covers and cannot be deleted

These covers are fixed as standard covers and cannot be deleted

-These covers can be deleted at the inception for a reduction in premium


- These covers can be added again during the policy period on payment of additional premium

Coverage for Professional Fees of Architects, Surveyors, Consulting Engineers

-Offered as an in-built coverage alongside the Standard cover. No extra premium required


-Up to 5% of claim amount

-Offered as an in-built coverage alongside the Standard cover. No extra premium required


-Up to 5% of claim amount

-Offered as an add-on cover on payment of extra premium


- Up to 3% of the claim amount

Cover for the Cost of Debris Removal

- Offered as an in-built cover.No extra premium required


- Up to 2% of the claim amount

- Offered as an in-built cover. No extra premium required


- Up to 2% of the claim amount

- Offered as an add-on cover on payment of extra premium


- Up to 10% of the Sum Insured 

Valuation Methods

- The Reinstatement Value is opted for to disclose the Sum Insured for all assets


- No option to add Escalation Clause

- The Reinstatement Value is opted for to disclose the Sum Insured for all assets


- No option to add Escalation Clause

- Insured can choose between Reinstatement Value or Market Value


- Insured can also opt for the Escalation Clause

Disclosure of Information

No particular specific requests for information from the insured

No particular specific requests for information from the insured

Insured needs to supply :


(i) Exact construction material of roofs, walls and flood

(ii) Building heights only in meters



Apart from some technical differences stated above, the three Fire Insurance products largely offer coverage against the same list of perils, including fire, floods, malicious damage, and come with roughly the same list of exclusions. The introduction of these separate categories of products for different sizes of businesses has made purchasing Fire Insurance much easier for businesses.

How can you file a claim for your Fire Insurance policy?

Opinions, conclusions and statements of intent expressed in this article are that of the author and Verak does not accept liability for the views expressed unless confirmed by an authorized representative of the Company independently of this communication.