Industrial All Risk Policy

IRDAI License Number: IRDAI/INT/ISNP/2022/250

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Industrial All Risk Policy

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Introduction

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Coverage

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Exclusions

This policy is comprehensive cover for loss or damage to all industrial risks (other than risks ratable under the Petrochemical Tariff) with an overall Sum Insured of 100 Cr. and above in one or more locations in India.

The IAR Policy should be taken by Industries which is looking to cover all major risk in their plant in a single Policy.

The policy covers all risks/perils other than those which are specifically excluded. The cover in its widest form, referred to as “All Risk“ includes the following perils/covers:

Section I (Material Damage)

I. Fire and All Special Perils

Fire
Lightning
Explosion/Implosion
Aircraft Damage
Riot, Strike and Malicious Damage
Storm, Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood and Inundation
Impact Damage
Subsidence and Landslide including Rock slide
Bursting and/or overflowing of Water Tanks, Apparatus and Pipes
Missile testing operations
Leakage from Automatic Sprinkler Installations
Bush Fire

II. Burglary including Theft
III. Machinery Breakdown/Boiler Explosion/Electronic Equipment Insurance

Explosion/ implosion due to its own working
Explosion due to smelt water reaction for waste heat boiler
Fuel gas explosion

Section II (Business Interruption)

FLOP (Fire Loss of Profit): Business interruption due to fire and all special perils
MLOP (Machinery Loss of Profit): Business interruption due to machinery breakdown.MLOP is an optional cover.

In addition to the perils/ expenses covered, the proposer can opt to seek cover in respect of the following perils/ expenses at inception or during currency of the policy on payment of additional premium: Perils Covered

Loss/ damage/ destruction of the property caused by Fire
Deterioration of Stocks in Cold Storage premises due to power failure following damage due to an insured peril
Forest Fire
Impact Damage due to Insured's own Vehicles, Fork lifts and the like and articles dropped therefrom
Spontaneous Combustion
Omission to insure additions, alterations or extensions
Earthquake (Fire and Shock)
Spoilage material damage cover
Leakage and contamination cover
Temporary removal of stocks
Terrorism

Expenses Covered

Architects , Surveyors and Consulting Engineer's Fees (in excess of 3% claim amount)
Debris Removal (in excess of 1% of claim amount)
Loss of Rent
Insurance of additional expenses of rent for alternative accommodation.
Start up Expenses

Material Damage Section

Building, plant, machinery and other fixed assets - on Reinstatement Value Basis
Stock and other current assets - at Market Value Basis

Business Interruption Section

Gross Profit (Net Profit + Standing Charges)

The IAR policy is an "All Risks" operational policy that covers all fortuitous mishaps barring a few named exclusions. These exclusions are:
Material Damage Section A) Excluded Causes

Faulty or defective design or workmanship
Inherent vice, latent defect
Gradual deterioration, wear and tear
Interruption of water supply, gas, electricity or fuel systems
Failure of effluent disposal systems
Collapse or cracking of building
Corrosion, rust, fungus, shrinkage, pollution or changes in temperature
Action of light, vermin, insects
Larceny
Acts of fraud and dishonesty
Inventory losses
Coastal and river erosion
Normal settlement or bedding down of new structures
Willful act or willful negligence
Cessation of work
War, invasion, mutiny, civil commotion
Permanent or temporary dispossession resulting from requisition by lawful authority
Destruction by order of public authority
Nuclear weapons material, ionizing radiations

B) Excluded Property

Money, cheques and other valuable documents unless specifically mentioned in the policy
Goods held in trust or on commission unless specifically mentioned in the policy
Vehicles licensed for road use
Property in transit other than that within the insured
Property in course of demolition, construction or erection
Land (including top soil) back fill, drainage or culverts, roads, runways, railway lines, reservoir, canals, tunnels, bridges, piers unless specially covered
Property damaged as a result of its undergoing any process
Property undergoing alteration, repair, testing, or servicing if damage thereto directly attributable to the operations of work performed thereon
Livestock growing crops or trees
Business Interruption Section The policy does not cover loss resulting from interruption of or interference with the business directly or indirectly from.
Any restriction or reconstruction or operation imposed by any public authority
Lack of sufficient capital to ensure timely restriction of normalcy
Suspension, lapse or cancellation of a lease license or order
Damage to boilers, economisers, turbines or other vessels where pressure is used resulting from their explosion implosion
Damage to electronic equipments, computers etc.

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Important Points to remember while Buying the Policy

Adequate Sum Insured - To Avoid Underinsurance

It is recommended to take MLOP Coverage

MLOP is an optional section but it is recommended to cover MLOP as Lead replacement time is many at times lengthier leading to large Business Interruption Losses.

Ensure that assets should be covered under the right entity/company

No Need to take any additional Burglary Policy

Burglary is a inbuilt coverage that IAR Policy provides. Therefore it nullify the need of separate Burglary Policy.

Risk Location/s should be properly mentioned

IAR is a location specific policy therefore.
Complete address with pin code should be clearly mentioned to avoide any ambiguity at the time of claim.

Downloads

Proposal Form

Policy Wordings

Claim Form

Key Documents

General Claim
Intimation Format

Immediate Action Client
Should Take

Indicative General Documents
for Settlement of Claims

Peril Based Documents Required
for Settlement

Our Insurance Partners

Claim Case Study - 1

Situation

Underinsurance

Challenge

Claims amount get reduced proportionately In relation to Sum Insured/ Value at Risk

Solution

Properties or machineries should be insured for market value or replacement value to be considered as on the date of loss (Not on the date of insurance) to avoid average clause

Advisory/Conclusion

Adequate Sum Insured to be taken after Valuation

Claim Case Study - 2

Situation

In a manufacturing plant short circuiting in a heavy machine due to which the claim was denied by the Insurance company

Challenge

Asset in which the short circuiting has originated is not covered as per the domain clause provision under policy terms and conditions.

Solution

Exact smaller part from which the shortcircuiting had occurred was identified. This resulted in the increase in the claim amount because the cost of the smaller part was only disallowed.

Advisory/Conclusion

Critical machines to be covered under both Fire and Machinery Break Down Policy so that this exclusion is not applicable and there is a resultant increase in the claim amount.

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FAQ's

PREMIUM

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CLAIMS

OTHERS

How is premium Calculated for IAR Policy?

Premium will depend upon various factors such as Nature of Business, Geographical Location of the business, Sum Insured, Sum Insured under Consequential Loss Section.
How is MLOP Rate charged?

For upto indemnity period of 12 Months, MLOP rate is fixed for all occupancy. The rate is 1 per mille.
What is the Premium rate for MBD section under IAR Policy. Is it Economical than Standalone MBD Policy?

Premium rate for MBD Section under IAR Policy is 0.25 per mille. It is at times economical than Standalone MBD Policy.
What is the premium rate for all Sections?
For Material Damage Section:
- FIRE - Rates as per the Standard Fire Special Perils Policy.
- Machinery Breakdown - .25 per mille
For Loss of profit Section:
- FLOP - Fire Policy rate
- MLOP - 1 per mille

What does IAR Policy cover?

The policy providescomprehensive cover for damage to assets and consequent loss due to interruption arising due to fortuitous events except “Exclusions” mentioned in the policy. The policy is offered for risks having sum insured of atleast 100 crore.
Is Burglary is in-build cover under IAR Policy?

Yes.
Does IAR policy provides wider coverage as compared with Material damage cover (Fire and MBD Insurance)?

The policy offers wider and broader coverage as compared to standalone Fire/ Machinery breakdown insurance. There are other salient features of the policy like under fire section of the policy under-insurance to tune of 15% is waived.
Which covers are compulsory in the IAR Policy?

Fire, Machinery Breakdown and FLOP are compulsory covers under IAR Policy, MLOP is optional.

If Excess Clause of MLOP section of IAR policy is 14 days and interruption period assessed by the surveyor is 16 days, is the claim payable?

Claim of loss of profit equivalent to 2 days of Standard Gross Profit shall be admissible.
What is the excess under Material Damage section?
- For Sum Insured upto 100 Crores (Property Damage + Business Interruption) - Excess is 5% of the claim amount subject to minimum of INR 5 Lakh.
- For Sum Insured between 100 Cr to 1500 Cr - Excess is 5% of the claim amount subject to minimum of INR 10 Lakh.
What is the excess under FLOP?

7 Days of Gross Profit.
What is the excess under MLOP?

14 Days of Gross Profit.

Can IAR Policy be offered to risks below 100 crores?

Due to administrative convenience insurance companies are offering the cover to risks having material damage sum insured of 50 crores.
For example, fire loss occurs in packing section of the factory and fire material damage claim is payable. If IAR Policy is issued with Department Clause and FLOP Excess of 7 days, applicable excess amount is equal to 7 day standard gross profit of the factory? True/False?

No. Applicable excess amount shall be equal to Standard Gross Profit of 7 days of packing section provided separate accounting books of packing section is maintained by the insured.
What is the minimum excess under IAR Policy?

For Sum Insured upto 100 Crore, the excess is as follows: Material Damage Section : (Fire & MBD Section) : 5% of the Claim Amount Subject to a minimum of INR 5 Lacs
FLOP : 7 days of Gross ProfitMLOP : 14 days of Gross Profit
What is the advantage of taking IAR policy instead of separate SFSP, MBD and FLOP policies?

It is a wider cover. Perils like accidental damage and burglary are covered in IAR policy. Rate for Machinery breakdown is low and depreciation is not applicable in IAR policy.
What are the benefits of IAR Policy over fire and other standalone policies?
Benefits of IAR Policy over fire and other standalone Policies are as follows:
- Burglary Section is inbuilt free cover in IAR whereas it is not free otherwise
- 15% under insurance is covered in IAR whereas it is not covered otherwise
- IAR is an all risk cover except the exclusion whereas Fire Policy is a named peril policy
- Accidental damage is automatically covered in IAR Policy whereas it is not covered in Fire & MBD Policies