The risks in a business are not always visible: a short circuit, an accident in the restaurant kitchen or a machinery failure can trigger a fire that seriously affects operations. Having a financial contingency plan is essential, and fire insurance provides comprehensive protection against the unexpected.
Furthermore, having this protection helps minimise the impact on employees, customers, and suppliers, thereby ensuring that the business can recover quickly and maintain its reputation intact.
As an insurance brokerage specialising in business insurance, at Ambler we work with your business to design protection programmes that combine maximum protection against the unexpected. Let’s take a look at what fire insurance is, what it covers and how it works when a claim occurs.
What is fire insurance?
Fire insurance for businesses is coverage that protects your company’s property against damage caused by fire, explosion or lightning strikes, according to the terms set out in the policy. It is usually included in property damage insurance or comprehensive construction insurance for shops, offices, industrial buildings and other commercial properties.
What does insurance cover in the event of a fire?
The policy includes a set of basic and optional guarantees that should be reviewed in detail.
Basic coverage for material damage
In most business-oriented policies, fire insurance usually includes at least:
- Fire damage: this is the core cover that protects against material damage caused by the direct action of fire (deformed structures, blackened walls, unusable machinery, destroyed goods, etc.).
- Damage caused by explosion or lightning strike: many insurers include protection against damage caused by explosion or lightning strike in their fire insurance policies, provided that it is related to the insured risk.
- Damage to the contents of the premises or industrial building: not only is the building (structure) protected, but also its contents, such as furniture, electrical appliances, computer equipment, production machinery, warehouse or cold storage stocks, as well as decorative items and other inventoried goods.
Relationship with property damage insurance and comprehensive construction insurance
- Property damage insurance for businesses: this type of policy protects buildings, facilities, machinery and stock against risks such as fire, explosion, lightning, vehicle impact, atmospheric phenomena and other direct damage.
- Comprehensive construction insurance: during construction work, this insurance covers damage that may be caused to the work itself, auxiliary machinery and stored materials, including fire, explosion or lightning strikes, among other risks during the construction phase.
Standard additional cover
- Theft or vandalism during a fire: some policies cover damage caused by looting, theft or vandalism occurring during or immediately after a fire, when the property is exposed and without sufficient surveillance.
- Civil liability for damage to third parties: a fire can spread to adjacent buildings, affect neighbours or the homeowners’ association, or damage a landlord’s facilities. Companies often supplement fire insurance with civil liability insurance that covers claims for personal injury, property damage and financial loss to third parties.
- Temporary office or premises expenses: if the property is unusable, many policies cover the rental of alternative premises, relocation expenses and other costs necessary to resume business.
- Electrical damage causing fire: electrical damage coverage usually covers both damage to installations and equipment and the consequences of a fire caused by electrical failure, always under the agreed conditions.
How does fire insurance work?
The operation of fire insurance can be divided into three key stages.
Before the accident: risk analysis and contracting
When a company takes out property damage insurance or specific fire insurance, the following is analysed:
- Business activity.
- The type of property and its construction characteristics.
- The location, industrial or urban environment, and fire brigade access points.
- The protective measures installed (detection, sprinklers, fire hose reels, fire extinguishers, emergency plans).
- The value of container and contents, and the valuation methodology (replacement value, actual value).
During the fire: immediate action
When a fire breaks out in a business, the basic steps recommended by organisations and professionals are:
- Ensure people’s safety (evacuation, cutting off supplies, alerting the fire brigade).
- Prevent the fire from spreading as far as possible without putting yourself at risk.
- Notify the insurance company or the broker managing the insurance programme as soon as possible.
After the fire: assessment and compensation
Once the fire has been brought under control and the incident has been reported:
- The insurer appoints an expert to analyse the probable cause of the fire, the extent of the damage and the replacement value of the affected property.
- The company may appoint an expert witness if it disagrees with the valuation.
- If discrepancies persist, the Insurance Contract Act provides for a system of appointing a third expert and issuing a joint opinion.
Factors influencing the price of insurance
The cost of fire insurance for businesses is calculated based on the characteristics of the risk.
1. Company activity
A professional office does not present the same level of risk as a restaurant with a gas kitchen or a warehouse where pallets or chemical products are stored.
- In industrial sectors with combustible materials (wood, textiles, plastics, chemicals), the probability and intensity of a fire are greater, and premiums are usually higher.
- In hospitality and catering activities, poorly maintained industrial kitchens and extraction systems are a common source of fire, which is why insurers analyse prevention measures in detail.
2. Property characteristics and location
Factors such as the following have an influence:
- Type of construction (metal structure, concrete, timber, sandwich panel, etc.).
- Built area and internal layout (fire zones, compartmentalisation, clear height).
- Distance to other buildings and access for fire engines.
- Location in industrial estates, logistics zones or dense urban areas.
3. Prevention and protection measures
The fire insurance premium also depends on the measures implemented:
- Automatic detection and alarm systems.
- Automatic sprinklers and hydrant networks.
- Fire extinguishers, fire hose reels and staff training in their use.
- Regular maintenance of electrical and gas installations.
- Internal emergency plans and documented drills.
4. Sum insured, valuation and excesses
When calculating the premium, the following are assessed:
- Insured sum for the building and contents: the higher the value to be insured (building, machinery, stock), the higher the basis for calculation.
- Valuation method: replacement value versus actual value (taking depreciation into account). This affects both the amount of compensation and the cost of insurance.
- Excess: many fire insurance policies include a portion of the risk assumed by the insured party (excess). The higher the excess, the lower the premium tends to be, although the company assumes more of the cost in the event of a claim.
5. Claims history and risk management
- Businesses with previous fires, significant claims, or frequent minor incidents may face surcharges or more restrictive conditions.
- Conversely, companies that demonstrate active risk management (investments in fire protection, regular training, documented reviews) tend to achieve better technical and economic conditions in their insurance policies.
Protect yourself and ensure the continuity of your business
As part of any company’s risk management strategy, fire insurance protects your business, its machinery and its stock, but it also serves as the basis for activating loss of profits and civil liability coverage, which can make the difference between being able to reopen or having to close down permanently after a serious incident.
If you want to review how your business is protected against fire, assess whether your insured sums are in line with reality, or integrate civil liability and loss of profits coverage, you can contact Ambler. Our team offers personalised advice tailored to your business and your growth objectives. Contact us today: protect yourself against the unexpected, insure your business and your peace of mind with the right policy.
