Industrial All Risk Policy
Industrial All Risk Policy (IAR)
Material Damage, Machinery Breakdown and Business Interruption can lead to heavy losses in a business. The Industrial All Risk Policy is a protecting solution that protects your business from financial implications in the case of material damage or breakdown of machinery causing a halt in operations. This is a wider cover than the Standard Fire and Perils policy.
Key Benefits of the IAR Policy
- Complete coverage for the risks that threaten the industrial unit
This is a wider range of risks in comparison to a Fire Insurance Policy. It gives the insurer the benefit of securing their business from a wider gamut of risks and not just fire.
- Option of coverage for Machinery Loss of Profits
The Industrial All Risk Policy also gives insurers the option of securing better coverage against losses occurring due to machinery damage.
- Loss through interruption and interference of business covered
The Policy will cover losses occurring to a business when their business operations come to a halt or are interfered with.
IAR Policy Eligibility
All industrial risks (other than risks ratable under Petrochemical Tariff) having an overall Sum Insured of Rs. 100 crores and above in one or more locations in India shall be eligible for an Industrial All Risk Policy. This policy provides cover against all risks/ perils other than those which are excluded in the Policy.
IAR Policy Coverage
The policy protects your business in the event of –
- Material Damage
This includes material damage that might occur to a property that might require replacement of assets like buildings, fixtures, inventory, etc.
- Business Interruptions
This is designed to cover loss of income that may occur due to business or service interruptions in the event of a disaster leading to material damage/machinery breakdown causing a halt in operations.
The Industrial All Risk Policy is important and relevant to several industries, especially those that need large spaces, have a heavy worker population, are most likely to have round the clock operations, are heavily dependent on electricity etc. These industries include:
- Cement Industries
- Metal Industries
- Power Plants
- Paper Mills
- Sugar factories
- Heavy Engineering
- Transmission line and sub stations
- Hospitality (Large Hotels)
Exceptions under the Industrial All Risk Policy
With wider coverage offered in comparison to the traditional Fire Insurance and Special Perils policy, an IAR Policy will protect businesses from an exhaustive list of perils under Material Damage. It however, does not cover certain events.
- Faulty or defective design of materials, inherent vice, and wear and tear
Damage caused to the business because of faulty or defective material that might lead to a rejection of the final product is not covered under the Industrial All Risk Policy.
- Collapse or cracking of buildings
Structural cracks in the industrial building leading to condemnation of the building, building collapse etc are not covered under this insurance policy.
- Corrosion rust, shrinkage, loss of weight, contamination, etc
Any form of contamination of the final products caused by corrosion, shrinkage, loss of weight etc are not covered by this policy.
- Larceny
The policy does not secure the business from theft on industrial property or any kind of pilferage.
- Dishonesty and inventory shortage
A shortage of inventory that might lead to halting of operations can lead to loss. However, these losses are not covered by the Industrial All Risk Policy.
- Wilful negligence, cessation of work, and loss of market
Losses in the market, negligence of staff leading to any kind of perils are not covered under this policy.
- War and war group of perils
A state of armed conflict among states or countries can lead to disruption of operations. This however is not secured under the insurance policy.
- Nuclear group of perils
Losses occurring due to a halt in operations because of damage to nuclear reactors in the vicinity of the industrial building are not covered under the Industrial All Risk Insurance Policy.
- Destruction of the property by order of public authority
Losses occurring due to halt of operations because of orders by any government authority are not covered under this policy.
Sum insured and premium
The Sum Insured for Section I (Material Damage) relating to buildings, machinery, furniture, fixtures, fittings and electrical installations shall be on Reinstatement Value basis only, while stocks shall be covered on Market Value basis. The Sum Insured for machinery breakdown risk should be the same as the Sum Insured of plant and machinery declared under fire, less the value towards piping and cabling. The Sum Insured for Section II (Business Interruption) based on Annual Gross Profit and Indemnity Period selected.
Indemnity Period i.e. the maximum period during which the business may remain interrupted, can be chosen by the insured depending on the activities involved.
The premium for a property insurance policy is dependent upon the type of cover opted, risk and liability exposure, maintenance of the property and deductible opted under the policy.
