Micro, Small, and Medium Enterprises (MSMEs) are considered the backbone of our country’s economy. They contribute significantly to employment and industrial output. However, many MSMEs operate with limited financial reserves, making them vulnerable to unexpected risks. One of the most devastating risks faced by small businesses is fire. Whether caused by electrical faults, natural disasters, or accidents, fire can destroy years of hard work within minutes. This is where having fire insurance can assist.
Why is having fire insurance important?
MSMEs should prioritise having fire insurance because of the following reasons:
Asset protection
Suppose there is a small furniture manufacturing unit in Jaipur that stores large amounts of timber and varnish, which are highly flammable materials. A short circuit could easily lead to a fire, turning lakhs worth of stock into ashes within minutes.
However, if the manufacturer has fire property insurance, then in the event of a mishap, he can claim the value of machinery, inventory, and furniture up to the covered amount. Without it, one accident could erase his years of savings and growth.
Machinery damage
Take the example of a textile dyeing factory in Tirupur that uses high-heat machines to treat fabrics. One overheated boiler or chemical spill could trigger a fire that ruins all equipment. If such an incident occurs, the insurer will take care of the replacement or repair of such specialised machinery, which often costs several lakhs.
The coverage will enable the factory owner to resume production without straining its finances, while also maintaining its competitiveness in a demanding market.
Inventory loss
Suppose you are a small electronics wholesaler in Delhi who keeps all your valuable goods, such as circuit boards and LED panels, in storage. One day, a fire caused by a shorted wire burns through the stock, destroying the entire shipment.
Fire insurance ensures that even if all goods are lost, you can claim the lost value and quickly restock, preventing long business interruptions and supplier penalties.
Business continuity
Take the example of a bakery shop in Pune. One day, it suffered a midnight fire due to an oven malfunction. As a result, it was unable to operate for three weeks during the repairs.
Fire insurance helps here by compensating for the loss of income caused by business interruption during downtime. This allows the bakery to pay staff salaries, rent, and supplier dues even when it is not operational, ensuring a smooth recovery without debt pressure.
Contractual obligations
Many clients require business owners to have fire insurance. For example, consider a packaging supplier in Noida who serves multinational FMCG clients. The clients require him to have this coverage. The reason is that if a fire affects the supply chain, the supplier, with the help of the insurer, will be financially capable of compensating the clients for the losses they suffer due to the non-delivery of goods.
Tenant safety
MSMEs that operate in rented spaces carry the risk of damaging the property owner’s assets during a fire. Fire insurance protects them from liability for such damages. For example, if a tenant’s MSME equipment sparks a fire in an industrial shed, the policy can compensate the landlord for structural loss. This benefit helps prevent legal disputes.
Legal protection
Fires can lead to complex legal cases, especially if other nearby businesses are affected. Fire insurance often includes liability coverage that protects MSMEs from third-party claims. For example, if a fire in a workshop spreads to an adjacent unit, the policy can cover legal costs and compensation. This prevents additional financial damage caused by litigation.
Loan facilitation
Banks and lending institutions often prefer lending to businesses that are insured. Fire insurance provides lenders with confidence that the collateral or assets are protected against damage.
Step-by-step guide to raising a claim for fire insurance
To raise a claim for fire insurance, consider taking the following steps:
- Step 1: Immediately control the fire (if possible) and prevent further damage. Do not tamper with the evidence.
- Step 2: Call the local fire department and obtain a Fire Brigade Report, which is crucial for claim processing.
- Step 3: Lodge a First Information Report (FIR) with the police, especially if arson or foul play is suspected.
- Step 4: Inform your insurance company within 24 hours of the incident via call, email, or their app/portal.
- Step 5: Fill out the insurer’s fire claim intimation form with details like policy number, date/time of fire, cause, and estimated loss.
- Step 6: Take clear photos/videos of the affected property and assets before cleanup or repair.
- Step 7: The insurer will appoint a licensed surveyor to assess the damage. Provide access to all requested documents.
- Step 8: Include the FIR, fire brigade report, purchase invoices, stock registers, repair estimates, and photos.
- Step 9: Review the loss assessment and raise objections (if any) with justification.
- Step 10: Once approved, the insurer will disburse the claim amount via NEFT or cheque.
Conclusion
Fire accidents can strike any business, regardless of its size or industry. For MSMEs, such incidents can be particularly devastating due to limited resources and capital. Prioritising fire insurance is not just about complying with regulations or avoiding losses; it is about ensuring business resilience, continuity, and financial stability.