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III IC-99 study materials
III IC-99 study resources

III IC-99: Property Insurance Coverages and Exposures

III IC-99 · Work through your exam, one topic at a time.

All guide sections

Property Insurance Coverages and Exposures

Scope

The exam tests fire and allied perils cover, the valuation methods that determine how much is paid, and the standard Indian property products. Numeric questions on average clause and depreciation are common.

Core rules

  • The Standard Fire and Special Perils (SFSP) policy covers twelve named perils: fire, lightning, explosion/implosion, aircraft damage, riot/strike/malicious/terrorism damage, storm/tempest/cyclone/flood/inundation, subsidence/landslide/rockslide, bursting of tanks and pipes, missile testing, sprinkler leakage, bush fire, and impact damage by road/rail vehicle or animal. Add-ons include earthquake, removal of debris, architects' fees and escalation.
  • Standard retail and MSME products: Bharat Griha Raksha (homes, 2021), Bharat Laghu Udyam Suraksha (MSME sum insured up to ₹5 crore) and Bharat Sookshma Udyam Suraksha (up to ₹50 lakh), introduced in 2020.
  • Valuation: market value (new cost less depreciation) versus reinstatement value (new for old, conditional on insuring to full reinstatement value). Salvage is deducted; the average clause applies where sum insured is below the value at risk.
  • Common exclusions: war and nuclear risks, wilful neglect, spontaneous combustion, electrical/mechanical breakdown, gradual deterioration, and property insured elsewhere.
  • Business interruption pays loss of gross profit plus increased cost of working, capped by the indemnity period, not by turnover.

Worked example

Stock value at risk on the fire date is ₹80 lakh; the policy sum insured is ₹60 lakh; the fire loss is ₹40 lakh; deductible ₹1 lakh. Reasoning. Average clause: claim = 40 × (60/80) = ₹30 lakh. Deduct the ₹1 lakh excess, so ₹29 lakh is payable. Note the insured's own underinsurance funded ₹10 lakh of the loss - the penalty for under-insuring.

Traps

Awarding the full loss regardless of sum insured; forgetting the deductible after averaging; treating reinstatement cover as automatic without the value condition; confusing business-interruption gross profit with revenue.