Know Risk is a community education program designed by the Australian and New Zealand Institute of Insurance and Finance (ANZIIF) to improve our understanding of insurance and how it relates to managing the many risks we all face in life.
Fire and perils insurance
Every small business owner's best friend.
Fire and perils insurance (sometimes referred to as “material damage insurance”) is certainly one for your consideration if you are a small business owner. Its purpose is to protect you and your business against loss or damage to buildings, contents and stock as a result of fire or other defined perils (things like earthquakes, malicious damage and storms).
Fire and perils insurance is commonly purchased as part of a business pack policy, but some insurers also offer it as a stand-alone insurance policy. Some insurers have specified sums insured for the items of coverage and others will allow you to tailor the sums insured to your needs.
If fire and perils insurance seems like something that might be relevant to your business, keep reading to learn the basics of coverage, as well as some common exclusions.
What is covered?
When it comes to coverage, it’s easier if we split it into two categories: the types of damaged items (i.e. the buildings and the contents) and the events that cause the damage.
Most (but not all) policies will usually provide cover for the following tangible items and events.
- Fixtures and fittings
- Car parks
- Water and fuel tanks
- Computer systems
- Paintings and works of art
- Goods that have been sold but not yet delivered
- Property that is being held at the premises for service or repair, but that does not belong to you
- Malicious damage, including that by burglars
- Impact by a vehicle, animal, tree, aircraft, a falling building
- Wind damage
- Hail damage
- Accidental damage
What are the optional extras?
Some policies will offer coverage of the following automatically, while other insurers will offer them as an optional extras.
This provides compensation for loss of profits as a result of business interruption due to an event covered under the policy.
This provides compensation for damage resulting from flooding.
What are some typical exclusions?
The types of things most fire and perils policies won’t cover you for include:
- General wear and tear
- Intentional damage
- Rust and corrosion
- Faulty work
- Tidal waves and other “actions” of the sea
- Movement of the foundation
- Damage caused by insects, rats or mice
- Self-explosion of boilers and pressure vessels
- Legal liability
How do I know if I need it?
As always, the best way to determine what is most appropriate for you and your business is to speak with a trusted business or insurance adviser. If you’re going with the latter, make sure you speak to someone who isn’t affiliated with a particular insurance company.
These types of professionals will be able to assess the specifics of your business and situation and then make an informed recommendation about what insurance policy is best for you.
They may also be able to make recommendations on which insurance company is best suited to your needs. For example, some insurers specialise in policies designed for specific trades.
Don’t be afraid to ask lots of questions — having clarity on the ins and outs of insurance related to your business will only enhance your ability to make the kinds of decisions that can help make your business a success.