Fire Insurance India: Types, Coverage & How to Buy

Overview

Fire insurance is a specialized property insurance policy that covers financial losses from damages to inventory, buildings, or machinery caused by fire, explosions, lightning, storms, or floods. It allows homeowners and businesses to rebuild or repair, often covering costs on a replacement value basis.

Fire insurance is available as a standalone policy in India and can also be purchased as part of a broader home or property insurance package. General insurers like HDFC ERGO and ICICI Lombard offer fire insurance products for homes, businesses, and industrial risks.

Since April 1, 2021, IRDAI has also mandated three fire insurance products: Bharat Griha Raksha, Bharat Sookshma Udyam Suraksha, and Bharat Laghu Udyam Suraksha.

This guide is ideal for those who want to know which fire insurance policy suits their needs the most.

Fire insurance rarely gets the spotlight in conversations about protection, but the numbers tell a different story. According to IRDAI’s Annual Report (FY 2024-25), general insurers paid out ₹12,775.6 crore in fire claims alone, accounting for nearly 12% of all non-health claims settled across the industry. That is a substantial sum changing hands to help businesses and homeowners rebuild after losses from fire, explosions, and related perils.

For homeowners, especially those with a home loan, fire insurance is often the requirement tucked into the fine print. This guide breaks down what it actually covers, why lenders ask for it, and how to choose the right policy.

What Is Fire Insurance and How Does It Work?

Fire insurance is a contract where an insurer agrees to compensate the policyholder for physical loss or damage to property caused by fire and allied perils, up to the sum insured, in exchange for a premium.

The policy covers the subject matter (building, machinery, stock, furniture, or other contents) against named perils listed in the policy document. If a covered peril causes damage, the insurer pays the cost of repair or replacement after applying the policy's terms, including any underinsurance conditions, deductibles, or depreciation.

A key principle in fire insurance is indemnity: the insurer restores you to the financial position you were in before the loss, not to a better position. This is why the sum insured must accurately reflect the property's current value.

If you underinsure, say, you insure a building worth ₹2 crore for only ₹1 crore, the insurer may apply the "condition of average" and proportionately reduce every claim payout.

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Types of Fire Insurance Policies in India

Since 2021, IRDAI has reorganized the fire insurance market around three standardized products. Insurers offering fire and allied perils cover were mandated to introduce these, replacing the earlier Standard Fire and Special Perils (SFSP) policy for most buyers.

Product	Who It Is For	Insurable Value
Bharat Griha Raksha (BGR)	Homeowners (building and/or contents)	Any sum insured
Bharat Sookshma Udyam Suraksha (BSUS)	Micro enterprises	Up to ₹5 crore per location
Bharat Laghu Udyam Suraksha (BLUS)	Small enterprises	Above ₹5 crore and up to ₹50 crore per location
SFSP or Customized Policy	Larger commercial and industrial risks	Above ₹50 crore

Bharat Griha Raksha: It is the retail home fire insurance product that can run for up to 10 years for the building component. Its key features are:

Contents automatically get cover at 20% of the building sum insured (capped at ₹10 lakh) without a separate declaration.
A full waiver of the underinsurance condition applies, meaning your claim will not be proportionately reduced even if the sum insured turns out to be inadequate.
Terrorism cover is built in.
Optional add-ons include coverage for valuables such as jewelry and art, and a personal accident benefit for the insured and spouse.

BSUS and BLUS: Both insurance types share a similar list of covered perils but differ on one critical point: the treatment of underinsurance.

Under BSUS, underinsurance is waived up to 15%, and the proportionate reduction only kicks in if the gap between actual value and sum insured exceeds 15%.
Under BLUS, the standard condition of average applies in full, meaning any underinsurance proportionately reduces every claim payout.

SFSP and Customized Policies: They cover risks above ₹50 crore. Post the 2024 IRDAI de-notification, policy wordings here are insurer-specific rather than standardized. Very large industrial risks may be written as Industrial All Risks (IAR) or Mega Risk policies with reinsurance-driven terms.

Other Structural Variants of Fire Insurance

Type	Benefits
Floater Policies	One sum insured across multiple godown locations, useful for businesses with distributed stock.
Declaration Policies	For fluctuating stock where the premium is adjusted against periodic declarations.
Reinstatement Value Policies	Pays the full replacement cost without deducting depreciation.
Fire Loss of Profit or Business Interruption	Covers loss of gross profit and increased operating costs during the period when the business cannot function after a fire, only if the material damage claim is admitted first.
Fire and Burglary Insurance	For those who want protection against both physical damage from fire and theft or break-in under a single policy.

What Does Fire Insurance Cover?

Most standard fire insurance policies in India cover the following incidents:

Fire (including incidents caused by the property's own fermentation, natural heating, or spontaneous combustion)
Lightning
Explosion or implosion (with some exclusions for boilers and pressure vessels)
Aircraft damage
Riots, strikes, and malicious damage
Storm, cyclone, typhoon, tempest, hurricane, tornado, flood, and inundation
Impact damage (from vehicles, animals, or falling objects)
Subsidence and landslide (including rockslide)
Leakage from automatic sprinkler installations
Bush fire

What Is Not Covered Under Fire Insurance?

War, invasion, and nuclear perils
Wilful destruction or arson by the policyholder
Pollution or contamination damage
Consequential losses (unless a separate Business Interruption policy is taken)
Wear and tear, gradual deterioration
Electrical or mechanical breakdown
Loss of earnings during repair (unless a Fire Loss of Profit policy exists)
Stock in open if not specifically declared
Cash, currency, and negotiable instruments
Experimental or unlicensed property

Note: The most common reasons fire insurance claims are rejected or reduced are underinsurance and misrepresentation of the sum insured. Always ensure the property at its full reinstatement value, not its market value or purchase price.

How to File a Fire Insurance Claim?

Inform the Insurer Immediately

Most fire insurance policies require notification within 24 to 48 hours of the incident. Call your insurer's claims helpline or notify your broker as soon as the fire is under control.

File an FIR

Obtain a fire brigade report for any fire loss. File a police FIR where the loss involves riot, strike, malicious damage, theft, or suspected foul play.

Do Not Disturb Anything

Preserve the damaged property as far as possible. The insurer will send a surveyor to assess the extent of damage. Cleaning up or disposing of damaged goods before the survey can compromise your claim.

Submit a Claim Form with Documents

Standard documents include the completed claim form, FIR and fire brigade report, photographs of the damage, original policy document, invoices or proof of ownership for damaged items, and a detailed list of losses.

Cooperate with the Surveyor

The insurer appoints a licensed surveyor for losses above a threshold (currently ₹1,00,000 under IRDAI regulations). The surveyor's report determines the admissible claim amount. You have the right to receive a copy of the survey report.

Claim Settlement

Once the surveyor's assessment is accepted, the insurer settles the claim by reimbursement or direct payment to a contractor for repairs, depending on the policy terms.

Quick Note: Under the Master Circular on Protection of Policyholders' Interests 2024, the surveyor's report is due within 15 days of allotment, and the insurer must decide within 7 days of receiving it.

How to Choose the Right Fire Insurance Policy?

Assess Your Coverage Needs: Calculate the value of your property, belongings, or business assets to determine the required level of protection.
Check What Is Covered: Ensure the policy protects against fire and other covered perils such as lightning, explosions, riots, or natural disasters, if applicable.
Review Exclusions: Understand situations and losses that the policy does not cover to avoid claim-related surprises later.
Choose the Right Sum Insured: Opt for a sum insured that reflects the current replacement cost of the insured property.
Consider Add-On Covers: Evaluate optional benefits such as debris removal expenses or business interruption cover based on your needs.
Compare Policies Carefully: Look beyond premiums and compare coverage features, benefits, and claim support offered by different insurers.
Check the Insurer's Claim Record: Choose an insurer with a strong claim settlement reputation and efficient customer service.
Read the Policy Document: Review the terms, conditions, deductibles, and claim procedures before making a final decision.

Why Choose Ditto for Insurance?

At Ditto, we've assisted over 8,00,000 customers with choosing the right insurance policy. Why customers like Vijay love us:

No-Spam and No Salesmen
Rated 4.9/5 on Google Reviews by 24,000+ happy customers
Backed by Zerodha
Dedicated Claim Support Team
100% Free Consultation

Confused about the right policy? Speak to Ditto's certified advisors for free, unbiased guidance. Book a free call or chat with us on WhatsApp.

Conclusion

Fire insurance is not a complex product, but getting it right requires attention to three things: buying the correct product for your buyer category, insuring at the right value to avoid underinsurance, and understanding what is and is not covered before a claim arises. IRDAI's three standardized products, Bharat Griha Raksha, BSUS, and BLUS, have made the product landscape cleaner for homeowners and businesses alike.

At Ditto, we recommend not treating fire insurance as an afterthought. It is one of those policies where the real value becomes clear only when something goes wrong. Meanwhile, our services are currently limited to health and term life insurance only.

Frequently Asked Questions

What is fire insurance and why do I need it?

Fire insurance is a property insurance policy that covers financial losses caused by fire and related perils such as lightning, explosions, storms, floods, and riots. It compensates the policyholder for the cost of repairing or replacing a damaged building, stock, machinery, or contents, up to the sum insured. For homeowners, a single fire incident can wipe out years of savings tied up in a property. For small businesses, it can also mean the difference between recovery and permanent shutdown.

What are the types of fire insurance policies available in India?

Since April 1, 2021, IRDAI has organized fire insurance in India around three standard products. Bharat Griha Raksha covers homes for any sum insured. Bharat Sookshma Udyam Suraksha covers micro enterprises with insurable value up to ₹5 crore per location. Bharat Laghu Udyam Suraksha covers small enterprises with a turnover between ₹5 crore and ₹50 crore per location. Risks above ₹50 crore are covered under the Standard Fire and Special Perils policy or customized wordings. Each product is segmented by buyer type and the total value of assets at risk.

What does a standard fire insurance policy cover in India?

A standard fire insurance policy in India covers damage caused by fire, lightning, explosion or implosion, aircraft damage, riots and malicious damage, storms, cyclones, floods, inundation, impact damage from vehicles or falling objects, subsidence and landslide, sprinkler leakage, and bush fire. Other IRDAI-standard products, such as Bharat Sookshma Udyam Suraksha and Bharat Laghu Udyam Suraksha, offer terrorism cover as an optional add-on. However, it is important to remember that fire insurance premiums vary by location, construction type, policy term, and insurer.

What is not covered under a fire insurance policy?

Fire insurance policies in India do not cover losses caused by war, invasion, nuclear perils, or wilful destruction by the policyholder. Pollution or contamination damage, electrical or mechanical breakdown, wear and tear, and gradual deterioration are also excluded. Consequential losses, such as loss of earnings during the repair period, are not covered unless a separate Fire Loss of Profit or Business Interruption policy exists. Cash, currency, negotiable instruments, and stock stored in the open without a specific declaration are also typically excluded from a standard fire insurance policy.

What is the difference between Bharat Griha Raksha and a regular fire insurance policy?

Bharat Griha Raksha is IRDAI's standardized home fire insurance product introduced on April 1, 2021. It has two features that distinguish it from older fire policies. First, contents are automatically covered at 20% of the building sum insured, capped at ₹10 lakh, without requiring a separate itemized declaration. Second, the policy includes a complete waiver of the underinsurance condition. This means your claim will not be proportionately reduced even if the sum insured is inadequate.

How do I file a fire insurance claim in India?

Inform your insurer within 24 to 48 hours of the incident to file a fire insurance claim. Then, register an FIR with the local police or fire department. Do not disturb the damaged property before the insurer's licensed surveyor completes their assessment, as this can affect the admissible claim amount. Submit a completed claim form along with the FIR, fire brigade report, photographs, original policy document, and proof of ownership for damaged items. Under IRDAI regulations, a licensed surveyor must be appointed for losses above ₹1,00,000, and you are entitled to a copy of the survey report.

What is fire and burglary insurance and who should buy it?

Fire and burglary insurance is a combined property insurance policy that covers damage caused by fire and related perils, as well as losses from theft or break-ins, under a single policy. It is offered by general insurers such as HDFC ERGO and ICICI Lombard and is particularly useful for shopkeepers, small business owners, and warehouse operators who face risks from both sources. Instead of maintaining two separate policies, a fire and burglary insurance policy bundles both covers, often at a lower combined premium than buying them individually.

What is the condition of average in fire insurance and how does it affect my claim?

The average clause is a clause in fire insurance policies that proportionately reduces your claim payout if the property is underinsured. For example, if your property is worth ₹2 crore but insured for only ₹1 crore, the insurer treats you as self-insuring 50% of the risk and pays only 50% of any admitted claim. Bharat Griha Raksha fully waives this condition for homeowners. Bharat Sookshma Udyam Suraksha waives it up to a 15% gap. Bharat Laghu Udyam Suraksha applies the average condition in full, making accurate valuation critical for small-enterprise buyers.

Is fire insurance mandatory for a home loan?

Most lenders require some form of property insurance covering fire and allied perils before disbursing a home loan, since the property is collateral and the bank wants its asset protected. However, this does not mean you must buy the bank's bundled policy. You are free to purchase a standalone fire insurance policy from any insurer of your choice and assign it in favor of the lender as security. At Ditto, we recommend comparing the bank's premium with standalone options, since bundled policies are often priced higher and offer limited coverage.

Last updated on: 14 Jun, 2026