Understanding your fire insurance policy: what’s actually covered

Fire insurance is one of the most important covers any property owner can hold, yet many people don’t realise how broad — or how specific — their policy really is. Understanding what you are covered for, and on what basis, is the best way to avoid an unpleasant surprise at claim time.

Beyond fire

A standard fire policy covers damage caused by fire, lightning and explosion. Most policies can be extended to include what insurers call “allied perils”: storm, flood, earthquake, burst pipes, impact damage, malicious damage and riot. In Zambia’s rainy season, storm and flood extensions are particularly valuable. Ask your broker which extensions you have — and which you don’t.

Buildings and contents are separate

Your policy will usually list separate sums insured for buildings, plant and machinery, stock and other contents. Each must be insured for an accurate value. If you add new equipment or carry higher stock levels at certain times of year, tell your broker so that the cover keeps pace with your business.

The danger of under-insurance

Most property policies contain an “average” condition. If you insure your property for less than its true value, the insurer may reduce any claim in proportion to the shortfall. For example, if your building would cost K2 million to rebuild but is insured for K1 million, you may only receive half of the cost of even a small, partial loss. Insuring for the full replacement value is essential.

Business interruption

For businesses, the damage to the building is often only part of the loss. While premises are being repaired, you may lose income while still paying salaries, rent and loan repayments. Business interruption cover replaces lost gross profit and pays the additional costs of keeping the business running during the recovery period.

Reduce the risk, reduce the premium

Fire extinguishers, working alarms, sensible storage of flammable materials, regular electrical inspections and good housekeeping all reduce the chance of a fire — and insurers take them into account. Our risk management team can conduct a survey of your premises and recommend practical improvements.