The Standard Fire & Special Perils Policy covers only named perils — fire, flood, storm, riot. If your factory is damaged by an unspecified cause, you have no coverage. Property All Risk (PAR) Insurance — marketed as the Business All Risk Flexi Policy — takes the opposite approach: all risks of physical loss or damage are covered unless specifically excluded. A single comprehensive policy with 8 co-ordinated sections covers your buildings, plant and machinery, stocks, machinery breakdown, and business interruption — across manufacturing, industrial, and commercial risks up to ₹2500 crore sum insured.
Fire & Property Insurance · All Risk · Manufacturing · Industrial · Commercial · Business All Risk Flexi Policy
Property All Risk Insurance — offered in India as the Business All Risk Flexi Policy by the insurer — is the most comprehensive property insurance available for commercial and industrial risks. Unlike the Standard Fire & Special Perils Policy which covers only specifically named perils, the PAR policy covers all risks of sudden and unforeseen physical loss or damage unless a specific peril is expressly excluded. This fundamental inversion — from named perils to all risks — provides vastly superior protection for manufacturing, industrial, and commercial properties. A single policy with 8 co-ordinated sections integrates material damage, machinery breakdown, and business interruption coverage in one unified structure, available for sum insured up to ₹2,500 crore.
All sudden and unforeseen physical loss or damage is covered unless specifically excluded — vastly broader than named-perils fire policies. The burden shifts to the insurer to prove an exclusion applies.
ALL RISKOptional Section 2 covers internal mechanical and electrical failure of plant and machinery — the critical gap in all fire policies. MD + MB together provide complete physical damage cover for the entire plant.
MACHINERYIntegrated FLOP (Fire Loss of Profits) and MLOP (Machinery Loss of Profits) sections cover revenue loss and standing charges during the indemnity period following a covered material damage or breakdown event.
FLOP / MLOPAvailable for large industrial risks with sum insured up to ₹2,500 crore — covering the full replacement value of large manufacturing complexes, industrial estates, and major commercial properties.
HIGH SIA waiver of underinsurance applies up to 15% deviation from the correct sum insured — providing a buffer against inadvertent underinsurance without proportionate claim reduction up to this threshold.
WAIVERSum insured can be set on Reinstatement Value (RIV) basis — full cost of replacing with new equivalent — or Market Value basis (reinstatement value minus depreciation) unlike the old IAR which was only RIV.
FLEXIBLE BASISThe Complete 8-Section Policy Structure — Mandatory, Optional & Customisable
The Business All Risk Flexi Policy is structured in 8 sections — one mandatory core section plus optional and customisable extensions. The entire property at the insured location must be covered (no partial selection of insured items is allowed).
The core and only mandatory section of the PAR policy. Covers all sudden and unforeseen physical loss or damage to the insured property — buildings, plant and machinery, stocks, furniture, fixtures and fittings — from any cause not specifically excluded.
What qualifies as “Material Damage” under Section 1:
• Fire, lightning, explosion of boilers and gas
• Aircraft damage, impact by road vehicles
• Storm, cyclone, typhoon, tempest, hurricane, tornado
• Flood and inundation (without the need for separate endorsement as in Fire policy)
• Subsidence, landslide, rockslide
• Bursting or overflowing of water tanks, pipes
• Riot, strike, malicious damage
• Accidental physical damage of any kind not covered by exclusions
What must be insured under Section 1: All property at the insured location must be covered. The “entire property must be covered” rule means no selective coverage of only some buildings or some machines — the entire risk must be brought into the policy. This prevents moral hazard and ensures adequate insurance of all exposed assets.
Add-ons available for Section 1 at additional premium:
• Earthquake (Fire and Shock) — coverage for earthquake-caused property damage
• Storm, Typhoon, Tempest, Hurricane, Tornado, Tsunami, Flood and Inundation (as a separate add-on with specific terms)
• Terrorism and Sabotage (under IMTRIP Terrorism Clause with defined terrorism deductible)
Section 2 provides coverage for sudden and unforeseen physical damage to insured machinery arising from internal mechanical or electrical causes — the category of losses specifically excluded from Section 1 (material damage) and from all standard fire policies.
Covered machinery breakdown causes:
• Short circuit, electrical burning: Electrical failure causing internal burning, arcing, or insulation breakdown in motors, transformers, switchgear, and control equipment
• Centrifugal force: Failure of rotating components from excessive speed or imbalance — flywheel fracture, impeller failure, disc failure in turbines and compressors
• Impact between parts: Internal collision of machine components — gear tooth failure, bearing collapse causing shaft impact
• Breaking, tearing, bursting: Internal fracture of machine components from material fatigue or manufacturing defect discovered only on failure
• Operator error: Damage from incorrect operation of machinery by trained operators — a very common real-world loss cause
The MD + MB combination: Section 1 (MD) + Section 2 (MB) together provide complete physical damage coverage for all plant and machinery — Section 1 for externally-caused damage, Section 2 for internally-caused failure. This combination eliminates the coverage gap that exists with fire-only policies, where insurers dispute whether damage is “accidental external damage” (Section 1) or “machinery breakdown” (Section 2) — under the PAR, both are covered.
Section 3(i) — Fire Loss of Profits (FLOP):
Covers loss of gross profit, increased cost of working, and standing charges (fixed costs) arising from the interruption of business following a covered material damage loss under Section 1. The indemnity period runs from the date of the damage event until normal operations are restored, subject to the agreed maximum indemnity period (typically 12, 18, or 24 months).
Section 3(ii) — Machinery Loss of Profits (MLOP):
Covers loss of gross profit and standing charges arising from the interruption of business following a machinery breakdown claim under Section 2. Many businesses incorrectly assume their FLOP covers machinery breakdown shutdown — it does not. MLOP is a separate cover for business interruption following machinery failure.
How FLOP / MLOP sum insured is calculated:
Sum Insured = Annual Gross Profit (Net Profit + Standing Charges) × Indemnity Period (months) / 12
Gross Profit = Turnover minus variable (specified) working expenses that would not be incurred if the business stopped.
Standing Charges = Salaries, interest on loans, rent, insurance premiums, rates, taxes — fixed costs that continue during the shutdown.
The integration of FLOP/MLOP within the same PAR policy eliminates disputes about whether a claim event triggers the MD claim (Section 1) or the FLOP claim (Section 3) — both are under the same insurer, ensuring co-ordinated settlement without inter-insurer conflict.
Sections 4 to 8 provide customisable extensions to the core coverage in Sections 1 to 3:
Section 4 — Extended Risk Protection: Extends the scope of covered risks beyond the base Section 1/2 coverage — may include additional hazards specific to the insured’s occupancy, enhanced natural catastrophe extensions, or other risk-specific extensions agreed at underwriting.
Section 5 — Extended Assets Protection: Extends coverage to additional asset categories or locations beyond those covered under the base sections — e.g., property temporarily at other locations, property in transit between insured locations, additional sites added during the policy period.
Section 6 — Extended Claim Operations Assistance: Covers costs associated with operating the claim — debris removal costs, professional fees for loss assessment, architects’ and surveyors’ fees for reinstatement design, and other claim-related operational costs that are not part of the direct physical repair cost.
Section 7 — Extended Claim Cost Assistance: Covers additional claim-related costs such as expediting expenses (express freight for replacement parts), temporary accommodation for displaced operations, and additional costs of working to minimise the loss.
Section 8 — Additional Clauses: Standard and special clauses that customise the policy terms for the specific insured risk — including waiver of subrogation clauses, lender’s interest endorsements, joint insured clauses, and other standard commercial insurance clauses required by lenders, lessors, or contract counterparties.
Key benefit: Many major add-on covers that previously required separate endorsements and additional premium are included within these extension sections, making the Business All Risk Flexi Policy more comprehensive than the older Industrial All Risks (IAR) policy it replaces.
Sum Insured Structure, Valuation Basis & the 15% Underinsurance Waiver
Correct sum insured setting is the single most important factor in PAR Insurance. The policy is available up to ₹2,500 crore SI on either Reinstatement Value or Market Value basis, with a built-in 15% underinsurance waiver.
On the Reinstatement Value basis, the sum insured represents the full cost to rebuild or replace the insured property with a new equivalent at current prices, without any deduction for depreciation or age of the existing property. This is the most protective basis and is recommended for all insured property except stocks.
What RIV includes:
• Buildings: Current construction cost to rebuild the insured structure — including materials, labour, professional fees (architect, structural engineer), and ancillary costs. Not the market value or the original construction cost (both may be significantly different from current RIV).
• Plant and machinery: Current cost of purchasing and installing a new equivalent machine at current manufacturer’s list prices — not book value or original purchase price. A 10-year-old machine may cost significantly more to replace new today than it did originally.
• Furniture, fixtures and fittings: Current replacement cost of equivalent items at today’s retail prices.
• Electronic equipment: Current replacement cost including installation, cabling, and software restoration.
Advantage: In the event of a total loss, the insured receives sufficient compensation to fully rebuild/replace without out-of-pocket expenditure due to depreciation gaps.
On the Market Value basis, the sum insured represents the reinstatement value minus an allowance for depreciation based on the age and condition of the insured property. This is similar to the “indemnity value” concept in motor insurance.
When Market Value basis is appropriate:
• Stocks and raw materials (where current market price is the natural basis for valuation)
• Old machinery where full RIV replacement is not economically justified
• Assets nearing end of useful life where the insured would not replace with new equivalent
• Situations where the insured entity (e.g., a lender recovering a bad loan) is only interested in the asset’s current resale value
Important: Unlike the old Industrial All Risks (IAR) policy which was only available on RIV basis (except for stocks), the Business All Risk Flexi Policy allows Market Value basis for all categories of insured property. This provides greater flexibility but requires careful consideration — Market Value basis may result in significantly lower claim settlements for newer assets where the depreciation gap is small but where the insured expects to receive the full replacement cost.
A key advantage of the Business All Risk Flexi Policy is its built-in waiver of underinsurance up to 15%. Under standard insurance law, if the sum insured is less than the full insurable value, the average clause (co-insurance) reduces all claim settlements proportionately. The 15% waiver means:
Example: Actual RIV = ₹100 crore. Sum insured = ₹87 crore (13% underinsured). Claim assessed at ₹20 crore.
Without the waiver: Settlement = ₹20 crore × (87/100) = ₹17.4 crore (proportionate reduction for underinsurance).
With the 15% waiver: Settlement = ₹20 crore in full — because the underinsurance (13%) is within the 15% waiver threshold.
Practical significance: Property values change constantly — construction costs rise, equipment prices inflate, and stock values fluctuate. It is practically impossible to maintain perfect accuracy in sum insured at all times. The 15% waiver provides a meaningful buffer against inadvertent underinsurance within a reasonable range. Beyond 15% underinsurance, the average clause applies in full. Annual review of sum insured is still recommended to stay within the 15% tolerance, especially in periods of high inflation.
The Business All Risk Flexi Policy uses differential deductibles — different deductible amounts apply to different sections and different types of loss:
• The deductible for Section 1 (Material Damage) may differ from Section 2 (Machinery Breakdown)
• Natural catastrophe losses (earthquake, flood, storm) typically carry higher deductibles than fire or burglary losses
• Terrorism deductible: Defined under the IMTRIP (India Market Terrorism Risk Insurance Pool) Terrorism Clause — the terrorism deductible is set by the pool and is uniform across all policies placed under IMTRIP
The differential deductible structure means insureds with strong risk management can opt for higher deductibles on sections where they have good control (e.g., fire, with fire safety systems in place) and lower deductibles where they have less control (e.g., natural catastrophe in high-risk zones). Premium is reduced for higher deductibles, providing cost optimisation flexibility.
Property All Risk vs Standard Fire & Special Perils — The Complete Comparison
The Business All Risk Flexi Policy represents a fundamental upgrade from the Standard Fire & Special Perils Policy. The comparison below explains why large industrial and commercial risks should be covered under PAR rather than the standard fire policy.
| Feature | Standard Fire & Special Perils | PAR — Business All Risk Flexi |
|---|---|---|
| Coverage basis | Named perils only | All risks unless excluded |
| Burden of proof | Insured must prove specific named peril | Insurer must prove exclusion applies |
| Machinery breakdown | ❌ Specifically excluded | ✓ Section 2 optional cover available |
| Business interruption | Separate BI policy required (FLOP) | ✓ Integrated FLOP + MLOP in same policy |
| Unidentified cause losses | ❌ Not covered (no named peril) | ✓ Covered (unless excluded) |
| Accidental damage | ❌ Limited (only named perils qualify) | ✓ Covered broadly |
| Underinsurance waiver | None — average applies in full | ✓ 15% waiver built in |
| Valuation basis | RIV or Market Value | ✓ RIV or Market Value (flexible) |
| Earthquake cover | Add-on at additional premium | Add-on at additional premium |
| Terrorism cover | Add-on under IMTRIP | Add-on under IMTRIP |
| Maximum SI | Unlimited (in principle) | Up to ₹2,500 crore |
| Occupancy suitability | All commercial/industrial occupancies | Manufacturing, industrial, commercial (not dwellings) |
| Claim disputes | Higher (cause attribution disputes) | Lower (all risk — fewer coverage gaps) |
The Business All Risk Flexi Policy replaces the older Industrial All Risks (IAR) policy with several important improvements:
• Broader occupancy scope: IAR was restricted to Section IV and V risk occupancies (specific industrial risk categories). The Business All Risk Flexi Policy is suitable for manufacturing, industrial, AND non-industrial commercial risks (excluding dwellings) — a much broader applicable market.
• Market Value basis available: IAR was only available on Reinstatement Value basis (except for stocks). The new policy allows Market Value basis for all asset categories.
• Major add-ons included without additional premium: Several add-on covers that required separate additional premium under IAR are now included in the Business All Risk Flexi Policy structure.
• 8-section flexible structure: The new modular 8-section structure allows greater customisation than the older IAR framework.
Probitas advises all large industrial and commercial risks currently on IAR or standard fire policies to review whether the Business All Risk Flexi Policy would provide better coverage at a competitive premium.
Which Businesses and Facilities Should Consider Property All Risk Insurance
PAR insurance is appropriate for any manufacturing, industrial, or large commercial risk where named-perils fire insurance leaves unacceptable coverage gaps, or where the risk management program requires the broadest possible property protection.
How to File a Property All Risk Insurance Claim
PAR claims benefit from the All Risk coverage basis — the claim process is generally simpler than under named-perils policies because the insured doesn't need to establish the specific peril causing the loss. However, prompt notification and thorough documentation are still essential.
Upon discovery of any loss or damage to insured property:
• Notify Probitas on 022 4302 0000 immediately — even before the full extent of the damage is known. Timely notification is a policy condition. Most PAR policies require notification within 24–72 hours of discovery.
• Take all reasonable steps to minimise further loss — firefighting, emergency repairs to prevent water ingress, securing damaged areas, and protecting undamaged property from further exposure.
• Do not commence permanent repairs or remove damaged property without the insurer’s surveyor having inspected the loss (emergency temporary repairs to prevent further damage are acceptable and should be documented).
• Notify relevant authorities if required (police for theft/malicious damage, fire brigade for fire, statutory authorities for specific events).
• If the loss also triggers a Business Interruption (FLOP/MLOP) claim, begin documenting the production stoppage, affected products, and daily revenue impact from the date of the event.
Comprehensive documentation is critical for PAR claims. Because the coverage is All Risk (rather than named perils), the survey focuses on: (a) what damage occurred, (b) the quantum of the loss, and (c) whether any specific exclusion applies — rather than whether the cause matches a listed peril.
Key documentation:
• Photographs and videos of all damaged property before any cleanup or repair
• Inventory of all damaged items with pre-loss condition and value
• Equipment damage reports from manufacturers or specialist engineers
• Maintenance records (for machinery breakdown claims — to establish the machine was properly maintained)
• Production records for the period before and after the loss (for BI claims)
• Financial records (audited accounts, management accounts) for FLOP/MLOP claims
• Police FIR for theft or malicious damage
• Fire brigade report for fire losses
• Any third-party reports (meteorological data for storm claims, seismic data for earthquake claims)
The insurer appoints a qualified loss surveyor to assess the claim:
For Material Damage (Section 1/2):
• The surveyor inspects the damaged property and assesses: the cause of the damage (to confirm no exclusion applies), the scope of reinstatement (repair vs replacement), and the cost of reinstatement at current prices
• For machinery breakdown claims, a specialist mechanical/electrical engineer may be appointed to assess the failure cause and scope
• The sum insured adequacy is checked — if the property is underinsured beyond the 15% waiver, proportionate reduction applies
For Business Interruption (Section 3 FLOP/MLOP):
• A forensic accountant is typically appointed alongside the property surveyor
• The accountant assesses: the maximum indemnity period (time to reinstate operations), the daily/monthly gross profit rate (from audited accounts), increased cost of working (ICOW), and the net BI loss for settlement
• FLOP and MLOP claims run concurrently with the underlying MD/MB property claim — the property surveyor’s reinstatement timeline drives the BI indemnity period calculation
For large PAR claims (typically above ₹50 lakh):
• Interim payments can be requested once the scope of loss is partially assessed — the insurer pays an agreed portion of the estimated total loss to allow the insured to begin reinstatement without cash flow pressure
• Interim BI payments can also be made to cover ongoing standing charges (salaries, rent, interest) during the indemnity period
• The final settlement is agreed once all repairs/reinstatement are complete and the full BI impact is calculable
• For total loss or near-total-loss events, the insurer may elect between cash settlement (paying the reinstatement value) or reinstatement in kind (the insurer manages the replacement procurement)
• The differential deductible for the specific type of loss is applied at settlement
Probitas manages the entire claims process — from initial notification through interim payments to final settlement — as your appointed broker and claim advocate.
Key Exclusions — Business All Risk Flexi Policy
While the All Risk basis is very broad, certain categories of loss are specifically excluded. The insurer must prove an exclusion applies to deny a claim — the insured does not need to prove the specific cause of loss.
Losses from war, invasion, civil war, revolution, military action, and government expropriation are excluded. Terrorism is excluded from the base policy but can be added under the IMTRIP Terrorism Clause with payment of additional premium.
Nuclear reaction, radiation, and radioactive contamination are excluded from all property insurance policies in India, as mandated by IRDAI and the Atomic Energy Act.
Progressive deterioration from normal use — corrosion, erosion, scaling, metal fatigue from cyclic use — is excluded. Only sudden and unforeseen events are covered. Gradual processes are maintenance responsibilities.
Loss arising from a defect that was inherent in the insured property before the policy was taken — a manufacturing defect or pre-existing structural flaw — is excluded as not an insurable risk.
Damage deliberately caused by the insured or arising from their gross willful negligence is excluded. Ordinary operational errors and accidents by employees are generally covered.
Business interruption, revenue loss, and indirect financial consequences of physical damage are excluded from Sections 1 and 2. Coverage for consequential loss requires Section 3 (FLOP/MLOP) to be specifically included in the policy.
Unless the specific add-on is purchased at additional premium, earthquake, storm, typhoon, flood and inundation may be excluded or have specific sub-limits. The standard policy covers fire and most other perils but natural catastrophe perils require add-ons.
The Business All Risk Flexi Policy specifically excludes dwelling houses and residential properties. PAR is available only for manufacturing, industrial, and non-industrial commercial risks. Separate residential property products are available for dwellings.
The information and product comparisons displayed on this platform are intended solely for general informational and evaluation purposes, and do not constitute a legal offer or binding insurance contract. Specific policy features, premium rates, riders, and underwriting guidelines are determined exclusively by the respective general insurance carriers and may vary significantly based on the insurer, product tier, and location across multiple Indian states. All quotes and premium calculations generated on this website are indicative estimates based on preliminary data and do not guarantee final underwriting approval or policy issuance by the insurer. For comprehensive details regarding specific coverage terms, limits, and permanent exclusions, please refer directly to the official sales brochure and policy wording issued by the respective insurance company, which will take absolute legal precedence in the event of any discrepancy or dispute.
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