Fire Insurance Clauses for Buildings (Part 1)

There are many Clauses available for use in the Fire Insurance Policy but do not mean that we can apply them across the board as some of these clauses are not relevant at all to the subject matter insured.

Generally, let us look at the applicability of some of the common clauses for buildings followed separately by machineries, stocks and other contents insured.

Suggested Clauses for Buildings

1) Mortgagee Clause (protects the financial interest of the bank to whom the building is mortgaged)

2) Automatic Renewal Clause (to be used in conjunction with the Mortgagee Clause -applicable to the bank issued proposal only)

3) Outbuildings Clause (need to top up the sum insured to include all other external structures such as gates, fences, garages etc which are outside the description of the main building)

4) Reinstatement Value Clause (specifies that indemnity is based on the cost incurred at the time of reconstruction not at the time of loss or damage)

5) Reinstatement Value-Day One Clause (caters to the inflation factor in the event the new reconstruction cost of the building exceeds the Policy's Reinstatement Value sum insured)

6) Designation Clause (protects the interest of the Insured. Insurer cannot dispute the claim in the event the name of the insured appearing in the receipt/invoice does not tally with the name appearing in the policy so long it can be proven that the Insured is the interested party insured under the policy)

7) Capital Addition Clause with minimum sum insured of RM1.5 million (caters to the alterations, improvements and additions to the existing buildings after the inception of cover, which total sum to be declared to the Insurer within 90 days therefrom for an additional premium to be charged)

8) Architect, Surveyors and Consultant's Fees (not included in the claim  unless separately insured or included as part of the sum insured.(Fire pays for physical damage to the structures only not the fees incurred)

9) Removal of Debris Clause (same as 8)

10) Foundation Exclusion Clause (Insurer will incorporate this Clause automatically. Can request to waive this clause if there is an absolutle risk of the foundation being damaged by a peril especially from the act of God. Sum insured must include the cost of the foundation)

11) Public Authority Clause (need to top up the sum insured to cater to the additional cost incurred in reinstating the building according to the new building by-laws which was not in place then.This holds true for pre-war buildings which may not meet today's new buildings by-laws etc)

12) Appraisement Clause (expedites the claim. Proof of purchase/invoice/ receipts are required for the damaged items only so long the loss does not exceed 5% of sum insured or RM 5,000 whichever is the lower)

13) Alterations & Repair Clause (protects the interest of the Insured in the event of a loss occurring in the premises caused by workmen performing some renovation, improvement works etc)

14) Tenant's Clause (protects the owner non occupier of the building against any claim due to the change in risk/occupation committed by the tenant without the knowledge of the owner. Insurer will honour the claim but the owner must agree to pay the difference in the premium based on pro-rata from the date the change in risk took effect)

15) Automatic Hold Cover for New Locations (good for Insured who may acquire new properties elsewhere within the insured territorial limits as part of their business expansion. Insurer will provide a 30 days grace period to cater to this new acquisition subject to declaration within 30 days therefrom and additional premium is paid based on pro-rata basis)

Next: Fire Insurance Clauses for Machineries