Comprehensive Guide to Property Insurance Add-on Covers & Clauses (Industrial Policies)
Property Insurance policies such as SFSP, IAR and Mega Risk Policies can be significantly enhanced through add-on covers, extensions, special clauses and endorsements. This post provides a consolidated reference of commonly used, restricted and discontinued add-on clauses applicable to industrial and commercial risks in India.
1. Salvage, Abandonment & Loss Adjustment Clauses
50:50 Clause – Abandonment of Property
Upon occurrence of loss or damage, the insurer may take possession, examine, sort, sell or dispose of damaged property. This right continues until the claim is finalized or withdrawn, without affecting insurer’s policy defenses.
Destruction of Salvage
Where damaged property is destroyed by mutual agreement, the insurer pays total loss. If reconditioning is chosen, salvage rights remain with the insurer.
Disposal of Salvage
The insurer shall not dispose salvage without written consent of the insured. If disposal prejudices insured interests, intrinsic value may be deducted from the claim.
2. Financial & Accounting Related Extensions
Accounts Receivable Clause
Covers uncollectible customer dues resulting from loss of accounting records due to insured perils, including:
- Outstanding customer balances
- Interest on loans raised to offset impaired collections
- Extra collection expenses
- Cost of re-establishing receivable records
Claim Preparation Costs
Covers reasonable fees of accountants, auditors, engineers and architects for preparing claim documentation. Legal fees, public adjusters and claim negotiators are excluded.
Payment on Account Clause
Allows interim claim payments up to 25% of assessed loss after submission of acceptable proof, subject to deductible.
3. Stock, Material & Process Related Covers
Accumulated Stocks Clause
Adjusts Business Interruption claims where turnover is temporarily maintained using accumulated finished goods stock.
Contamination & Co-mingling of Stocks
Covers loss to stocks due to contamination or mixing while under insured’s care, custody or control, subject to sub-limits.
Catalyst & Consumable (Including Refractory & Lining)
Covers loss of catalyst and consumables in process, including sudden poisoning or deactivation. Indemnity basis: Actual Cash Value.
Molten Metal Spillage
Covers damage caused by accidental spillage of glowing molten material without fire, excluding the cost of molten material itself.
4. Cost Escalation & Loss Mitigation Extensions
Additional Increase in Cost of Working
Covers necessary costs incurred to maintain business continuity not payable under standard Gross Profit provisions.
Expediting Expenses
Includes overtime wages, express freight and emergency transportation to speed up repairs, subject to percentage and monetary limits.
Loss Minimization / Loss Prevention Expenses
Covers reasonable expenses incurred to prevent aggravation of insured loss, including shifting of property and emergency actions.
5. Legal, Regulatory & Authority Related Covers
Public Authorities Clause
Covers increased reinstatement cost due to compliance with building regulations, by-laws and statutory requirements.
Decontamination Expenses
Covers increased cost of decontaminating insured property following enforcement of pollution or hazardous material laws.
Deliberate Damage by Authorities
Covers physical loss caused by actions of government authorities to prevent imminent damage, excluding consequential losses.
6. Property Movement & Location Extensions
Temporary Removal (Excluding Stock)
Covers insured property temporarily removed for repair, cleaning or renovation within India.
Temporary Removal of Stock
Covers stock temporarily sent for processing or fabrication, subject to percentage of total sum insured.
Off-site Storage / Property Not on Insured Premises
Extends cover to insured property stored at declared offsite locations.
7. Business Interruption & Dependency Covers
Customers, Suppliers & Fabricators Extension
Covers BI losses arising from damage at customer or supplier premises, subject to tier-wise limits and peril restrictions.
Utilities Extension
Covers interruption due to damage at public utility premises up to first tier only.
Group Interdependency Clause
Covers BI losses caused by damage at another insured location of the same group.
8. Special Interest & Ownership Clauses
Additional Insured Clause
Allows naming of joint venture partners, contractors or financiers as additional insureds without increasing policy limits.
Hire Purchase / Lease / Consignment Property
Covers property belonging to others but under insured’s care, custody or control.
Non-Vitiation / Multiple Insured Clause
Ensures that breach or fraud by one insured does not prejudice coverage of other innocent insured parties.
9. Fire, Natural Perils & Special Clauses
Spontaneous Combustion
Covers fire damage arising from self-heating or fermentation, subject to strict risk-management warranties.
Seventy-Two Hours Clause
Treats all losses from Windstorm, Flood or Earthquake occurring within 72 hours as one single occurrence.
Fire Fighting Expenses
Covers costs of firefighting materials, wages, damaged clothing and refilling fire protection equipment.
10. Discontinued / Restricted Clauses
- Delay in Repair
- Inland Transit
- Free Issue Materials
- Waiver of Contribution
- Errors & Omissions
- Inadvertent Property Omission
- Power Banking Clause
- Denial of Access (Treaty Restricted)
Conclusion
Selecting the right add-on covers is critical for ensuring adequate risk transfer, claim certainty and business continuity. Each extension carries sub-limits, deductibles, warranties and treaty restrictions, and must be aligned with operational exposure.
For underwriting submissions, RFQs or policy structuring, these clauses should be carefully evaluated with insurers and brokers.
Disclaimer: Wordings are indicative and subject to insurer approval, underwriting guidelines and treaty terms.
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