Fire remains one of the biggest risks for homes, shops, warehouses, and factories in India. Recognizing this, the Insurance Regulatory and Development Authority of India (IRDAI) issued a 2025 circular to update fire insurance rules, ensuring fair premiums, wider coverage, and faster claims.
This article breaks down the new rules in simple terms, helping families, shop owners, and businesses understand what’s changed and how to stay protected.
Why Fire Insurance Matters in India
- Fires cause losses of ₹10,000+ crore annually (industry estimates).
- Most small shops and SMEs are underinsured.
- A single fire can wipe out savings and push businesses into bankruptcy.
Fire insurance provides financial protection by covering losses to buildings, stock, machinery, and even home contents.
Key Updates in IRDAI’s 2025 Circular
1. Standard Fire & Special Perils Policy (SFSP) Made Mandatory
- All insurers must issue fire insurance under the revised SFSP 2025 format.
- Coverage includes fire, lightning, explosion, storm, flood, riot, strike, and impact damage.
2. Micro & SME Friendly Premium Bands
- Premium slabs introduced for shops, clinics, and small warehouses.
- Simplified pricing to encourage small business owners to buy cover.
3. Faster Digital Claims
- Claims up to ₹5 lakh can be settled digitally within 7 working days.
- Drones and satellite images to be used for loss assessment.
4. Wider Inclusions
- Coverage extended to short-circuits, gas cylinder explosions, and spontaneous combustion.
- Optional add-ons for earthquake and terrorism cover.
5. Mandatory Disclosure by Policyholders
- Businesses must declare fire safety equipment (extinguishers, sprinklers).
- Premium discounts offered for safety compliance.
Exclusions (Still Not Covered)
- Fires due to war, nuclear risks, and wilful negligence.
- Losses to cash, valuables, and stock in open areas.
- Mechanical breakdown unless specifically covered.
Impact on Different Segments
Homeowners
- Easier access to affordable fire cover bundled with home insurance.
- Household goods like furniture and electronics can now be insured.
Small Shops & SMEs
- Lower premium rates mean a typical kirana store can insure stock worth ₹10 lakh for just ₹2,500 per year.
Industries & Factories
- Stricter compliance with fire safety norms required.
- Higher claims transparency with drone-based surveys.
Case Example
In 2024, a textile shop in Surat lost goods worth ₹18 lakh in a fire. The owner had no insurance and faced bankruptcy. Under the 2025 rules, he could have secured cover for less than ₹5,000 annually and avoided complete financial loss.
Why This Matters
IRDAI’s 2025 circular is a game-changer for fire insurance in India. It aims to make protection accessible, affordable, and digital-first. For families, SMEs, and industries, fire insurance is no longer optional—it’s essential.
👉 Next, read: Why Marine Insurance Is Still Undersold in India
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