industrial all risk insurance
Industrial All Risk Insurance Policy

Industrial All Risk Insurance Policy

The Industrial All Risk (IAR) Insurance policy was created to cover major manufacturing industrial risks with broader and more complicated exposures than typical Fire and Allied Insurance policies could handle. The policy is created as a multi-line product that allows a client to select from a variety of sections.

This is a Comprehensive Package Policy that covers practically all risks and perils that a large industry may encounter throughout its operations. This insurance provides Reinstatement value coverage for buildings, machinery, furniture, fixtures, fittings, and electrical systems, while stock is covered on a market value basis. If the underinsurance on each item of the schedule does not exceed 15% of the total sum covered, it will be ignored. For a period of 60 days, the policy also covers equipment and machinery sent for maintenance outside the premises. The risk of transit within an industry’s compound is also covered.

Salient Features of Industrial All Risk policy

Here are the salient features of the Industrial All Risk Policy;

  • A policy that is comprehensive, practical, and cost-effective

  • All-risk nature package policy.

  • There isn’t a named peril policy.

  • Except for a few particular exceptions, all dangers are covered.

  • Tariffs in the Indian market

  • Policy on a Single Document

  • Burglary losses (both MD and BI) are covered.

  • Inside an industrial compound, the risk of transit is covered.

  • Due to lower rates, MB cover can save you a lot of money on premiums.

  • For Limited Life Equipment, no depreciation is subtracted from the MB loss (total or partial).

  • Compulsory BI due to fire and other hazards.

  • Optional BI due to machinery failure, boiler explosion, or electronic equipment failure.

  • Except for stocks, IAR insurance is only available on a reinstatement value basis. Stocks are valued based on their current market value.

  • Petrochemical Risks are not covered by the IAR policy.

Benefits

Here are the benefits of the Industrial All Risk policy;

1. Does it Provide Complete Protection Against all Threats?

In comparison to a Fire Insurance Policy, this policy covers a broader range of dangers. It allows the insurer to protect their organization against a broader range of dangers, not simply fire.

2. Coverage for Machinery Loss of Profits is an option

Insurers can also use the Industrial All Risk Policy to secure stronger coverage against losses caused by machinery damage.

3. Business interruption and interference losses are compensated

The policy will pay losses incurred by a company when its commercial operations are disrupted or halted.

Eligibility Criteria

An Industrial All Risk Policy is applicable to all industrial risks (except those ratable under the Petrochemical Tariff) with an overall Sum Insured of Rs. 100 crores or more in one or more locations in India. Except for those risks/perils specifically excluded in the policy, this policy offers coverage against all risks/perils.

Industrial All Risk Insurance coverage

The policy protects your business in the event of –

Damage To The Material

This comprises property damage that necessitates the replacement of assets such as buildings, fixtures, inventory, and so on.

Interruptions in Business

This is intended to cover any loss of income that may occur as a result of business or service interruptions in the case of a disaster that results in material damage or machine failure, forcing a halt in operations.

The Industrial All Risk Policy is vital and relevant to a variety of businesses, particularly those that require huge spaces, have a large workforce, are likely to operate around the clock, are strongly reliant on electricity, and so forth. These are some of the industries:

  • Cement Industries

  • Paper Mills

  • Sugar factories

  • Heavy Engineering

  • Metal Industries

  • Power Plants

  • Transmission line and substations

  • Hospitality (Large Hotels)

What is Not Covered Under The Policy?

An IAR Policy will protect organisations from an extensive number of hazards under Material Damage, offering more coverage than a typical Fire Insurance and Special Perils policy. Certain incidents, however, are not covered.

1. Materials with flaws or defects, inherent vice, and wear and tear

The Industrial All Risk Policy does not cover damage to the business caused by faulty or defective material that could result in the final product being rejected.

2. Building collapse or cracking

This insurance policy does not cover structural weaknesses in industrial buildings that lead to condemnation, building collapse, and other issues.

3. Corrosion rust, shrinkage, loss of weight, contamination, etc

This policy does not cover any contamination of finished items caused by corrosion, shrinkage, weight loss, or other factors.

4. Larceny

The policy does not protect the company from theft or pilferage of industrial property.

5. Dishonesty and inventory shortage

A scarcity of inventory that causes a halt in operations can result in a loss. The Industrial All Risk Policy, on the other hand, does not cover these losses.

6. Willful negligence, cessation of work, and loss of market

This coverage does not cover market losses or employee negligence that results in any type of peril.

7. War and war group of perils

A situation of armed conflict between nations or countries might cause operations to be disrupted. The insurance coverage, however, does not cover this.

8. Nuclear group of perils

The Industrial All Risk Insurance Policy does not cover losses resulting from a suspension in activities due to damage to nuclear reactors in the vicinity of the industrial building.

9. Destruction of the property by order of a public authority

This policy does not cover losses caused by a suspension in activities as a result of directives from any government authority.

Sum Insured and Premium

Buildings, machinery, furniture, fixtures, fittings, and electrical systems will be covered on a Reinstatement Value basis exclusively, whilst stocks would be covered on a Market Value basis.

The Sum Insured for machinery breakdown risk should be the same as the Sum Insured for fire-damaged plant and machinery, minus the value of piping and cabling. The Sum Insured for Section II (Business Interruption) is calculated using the Annual Gross Profit and the specified Indemnity Period.

Indemnity The insured can choose the period or the maximum length during which the business can be disrupted, according to the activities involved.

The cost of a property insurance policy is determined by the type of coverage chosen, the risk and liability exposure, the property’s upkeep, and the policy’s deductible.

Frequently Asked Questions

Here are the frequently asked questions that you should know;

1. What risks are identified in the IAR policy?

The IAR policy does not include any perils. In the policy, only excluded properties and excluded causes are stated. Any damage caused by an accident that is not stated as exclusion is covered.

2. In addition to our IAR policy, do we need a separate burglary policy?

Burglary is not excluded and is therefore covered by the IAR insurance.

3. What are the benefits of using an IAR policy rather than distinct SFSP, MBD, and FLOP policies?

It’s a more expansive cover. The IAR coverage covers perils such as unintentional damage and burglary. The rate of machinery breakdown is low, and IAR policy does not allow for depreciation.

4. Can I include livestock in my IAR policy together with other assets?

The IAR policy does not include cattle.

5. Does depreciation apply to breakdown claims such as MBD or EEI?

A Reinstatement value policy is an IAR policy. For breakdown claims such as MBD or EEI policies, depreciation is not applicable.

6. While relocating our machinery to our on-site facility for overhauling, it is accidentally damaged. Is it protected?

Yes. The IAR coverage covers damage that occurs during transit within the premises.

7. Is there a garden on the industrial premises that are covered by the policy?

No, the IAR policy does not cover the garden within the industrial premises.

8. Is the MLOP part required by IAR policy?

No, only the section on fire loss of profit is required. Machinery LOP is a cover that is available as an add-on.

9. Is FLOP a requirement?

Yes. FLOP is a required section.

10. What is the duration of the indemnification period? What is going to be done about it?

The maximum business interruption period for which a claim is receivable is known as the indemnity period. It will be established by Insured, taking into account the type of the manufacturing unit and the time required for repair and resumption of production in the event of a claim.

11. Are my workers' acts of fraud or dishonesty protected by the IAR?

The IAR policy does not cover acts of fraud or dishonesty. It is necessary to purchase a separate Fidelity Guarantee policy.

12. Is collision-related damage to motor vehicles covered?

The IAR policy does not cover vehicles that are licensed for road use.

13. Should I take the IAR with the RIV clause?

The RIV provision is not necessary for IAR policies because claim settlement is done on a Reinstatement basis.

14. The government has ordered that all property covered by the IAR be destroyed. Is it going to be covered?

No. It’s a blanket prohibition.

15. Is it true that I only insured our company's assets for 90% of their value? Will there be a claim under insurance in an IAR policy?

Insurance is not applicable in an IAR policy if the sum insured is less than 85% of the value at risk.