October 26, 2021

Standard Fire and Special Perils (SFSP) Insurance Policy

Standard Fire and Special Perils (SFSP) Insurance Policy

Standard Fire and Special Perils (SFSP) is a Fire Insurance policy that provides businesses comprehensive protection against fire and allied perils. Through SFSP, commercial assets like building, plant and machinery, furniture and fixtures, electronic equipment, and stock are covered against the risk of damage or destruction due to fire, lightning, riots, floods, malicious damage and a host of other perils.

Up until April 2021, the Standard Fire and Special Perils policy (SFSP) was the only product that insurance companies offered their clients for the purpose of insuring assets against fire and related perils like riots, storms, earthquakes, explosions, etc. However, according to new IRDAI (Insurance Regulatory and Development Authority of India) rules, from 1st April 2021, 3 other fire insurance policies have been introduced and the scope of SFSP policies has been reduced. ‌

‌SFSP usually covers loss, damage, or destruction of the insured property caused by:‌

Add-on covers :
‌In addition to the above covers, the insured can also opt for the following add-on covers at the inception or during the policy period as desired. These additional covers can be availed by paying an additional premium.‌

You can opt for the following  add-ons to your SFSP policy :‌

  • Deterioration of stocks in cold storage premises due to power failure following damage due to an insured peril
  • Forest fire
  • Impact damage by insured's own vehicles, forklifts and the like and articles dropped from such carriers
  • Spontaneous combustion
  • Earthquake - this includes both fire caused by an earthquake and damage due to the shockwaves
  • Spoilage material damage cover- this will cover any loss or damage caused by spoilage in the event of interruption of usual business operations
  • Leakage and contamination cover
  • Temporary removal of stocks
  • Terrorism - the workings of this cover will depend on the terrorism clause attached to the policy schedule on option‌

You can also cover the following expenses by opting for their add-ons  :‌

  • Architects, Surveyors and Consulting Engineer's fees. This does not include fees in association with the preparation of the insured’s claim or estimate of loss
  • Debris removal (limited to 10% of the sum insured)
  • Loss of rent
  • Additional expenses of rent for alternative accommodation
  • Start up Expenses - expenses incurred while starting up the business after a loss or destruction by insured events‌

‌‌An SFSP Fire Insurance policy does not cover the following :

Other exclusions :‌

  • Loss of earnings, loss by delay, loss of market or other consequential or indirect loss

  • Expenses incurred via
    (a) Architects’, Surveyors, Consulting Engineer’s fees
    (b) debris removal; in excess of 3% and 1% of the claim amount respectively

  • When it comes to loss or damage from “Act of God” Perils, 5 % of each claim (subject to a minimum of ₹10,000) will not be covered. These perils can be Lightning, an STFI risk, Landslide, Subsidence or Rockslide. This means that claims for these events will be paid only after deduction of 5 % or ₹10,000, whichever is highest

  • When it comes to damage or loss arising out of all other perils (not Act of God perils), the first ₹10,000 of the claim will not be covered‌

As per new regulations by the Insurance Regulatory and Development Authority (IRDAI), w.e.f. 1st April 2021, the old SFSP model has been divided into 3 products covering 3 distinct categories of property. This was done in order to discontinue standardized pricing and allow variation depending on insurers’ own risk assessments.

However, a version of the old SFSP policy still exists for businesses with annual turnover exceeding ₹50 Crore.

The other three products are as follows:‌

This is an Insurance product that provides cover for personal homes and dwellings. Earlier, a Standard Fire and Perils Policy (SFSP) would provide coverage for house properties as well, but it has now been diluted into this product. ‌

A BSUS policy is a commercial insurance product that offers fire and allied perils cover to all businesses with turnover less than ₹5 Crore. Commercial assets like building and structures, stocks, plant and machinery, etc. are insured against various risks like fire, earthquakes, volcanic eruptions, explosions, implosions, riots or strikes, war related risks, nuclear risks, landslides, terrorist acts, and much more. In addition to these, this policy also offers in-built covers for stocks that are located at more than one location, or are moved around, for professional fees, and for startup expenses after loss, etc. ‌

For a full list of covers and exclusions of a BSUS policy, head to our article here

A BLUS policy is much like a BSUS policy, with the only difference being the eligibility criteria. Only businesses with turnover more than ₹5 Crore but less than ₹50 Crore can take a BLUS policy for insuring their assets against fire and allied perils. Much of the particulars of a BLUS policy, such as assets and perils covered, claims process, in-built covers, etc. are similar to those of a BSUS policy. ‌

For a full list of covers and exclusions of a BLUS policy, head to our article here

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.