Industrial Special Risks Insurance
Industrial Special Risks is known as a policy that covers everything except what is specifically excluded. It is kind of an Insurance in reverse. Instead of telling what is covered, it simply tells you what is not covered. However, this can also make it just as complicated.
For many years, two “Industry” versions have been used as the basic cover. Either Mk iv and Mk v have often been followed In recent times, with a huge range of different endorsements designed to reduce the cover down to an acceptable level for Insurers. Industrial special risks insurance is for a number of businesses, a “must” for a well-diversified insurance plan.
Why do you need it?
This type of insurance is there to cover risks such as Fire, Storm or Criminal Acts to assets and property that belong to a business. It has both a Material Damage Section and a Consequential Loss (Business Interruption) Section.
What I like about this cover as an Insurance Broker is it is capable of picking up any potential gaps not thought about by the Broker while the ones that have been thought about, a decision is made whether they should be covered or handled in a different way. Many times this is taken out of the Broker’s hands because the insurer simply does not have the capacity to accept them. They become the set of endorsements Insurers automatically exclude. It is the Gaps not thought about which are protected by an ISR because the insurer has not specifically excluded.
These can be issues to do with rare events such as subsidence and structural problems. Many can be so improbable but not unforeseeable and because of this, the insurer has not thought to exclude. For this reason it gives better protection.
As this is designed to be combined with your first insurance level, it is often used by larger commercial and corporate businesses. Those that have a great deal of size and diversity, in particular, are advised to consider this policy. However, most insurers will have a minimum size criteria with most only considering if you have more than $5 Million in assets to be insured.
What does it cover?
As already discussed, industrial special risks (ISR) insurance covers many areas in which others don’t touch – this is an important point.
Then there are risks you expect to be covered but can be contained or restricted by endorsement. A Material Damage section of an ISR policy will pick up all the following, but the only thing you are likely to see mentioned is an endorsement restricting or being more specific about what it will not cover:
- Accidental Glass Breakage: Internal and external sources of glass are covered, such as those in signs, cisterns, sinks, etc. The endorsement may simply exclude drinking implements or containers made of glass.
- Burglary: Damage or events due to forced or violent entry, theft on the premises or outbuildings, etc. An endorsement may exclude cover where the declared security, such as a back to base alarm, has not been turned on.
- Money:Any damage to money for any cause other than the following common exceptions: embezzlement, money handled by carriers, unlocked/unattended vehicle. An exclusion may refuse a claim that is not reported within five working days, along with others.It may also sub-limit the amount of money to a total limit of say $500,000 or $1,000,000 depending on the type of business and what has been agreed.
- Perils:Aircraft, smoke, riots and strikes, earthquakes, subterranean fire, volcanic eruption, vehicle impact, explosion, lightning, fire, smoke, storm and rainwater, overflowing or discharged water, and others. An endorsement may exclude such events if caused by acts of war caused by Government. Another may exclude ownership of Aircraft or any water borne craft.
Additional exclusions may apply, and this may include or exclude certain aspects of your policy. However, this should give you a more accurate idea of the wide coverage provided by industrial special risks insurance.
What to do next?
Certain industries are obvious choices for this type of insurance, along with companies and corporations of a larger size.
You should review with your Insurance Broker whether this product is available to your business and whether it would be more preferable to switch to. Be aware though that you still need to have a separate Public/Products Liability cover as well as other specialist covers. Also ISR policies have become more restrictive in their coverage. For instance most no longer will consider including Machinery Breakdown, Fidelity as well as Public/Products Liability yet the Business Packs for the smaller risks all include these.
Also excesses/deductibles are considerably higher. Usually at least a minimum of $1,000. So the price difference has to be worth it as you are bearing more of your own cost.
This means taking “Stand alone” cover for these other policies, which can be good from the point of view of broader specialist markets with lower premiums, but again this depends on the size of your business. You may have no choice but to stick with a Business Pack Insurance.
Who should you talk to?
A skilled and experienced Insurance Broker can help you determine if this is the most appropriate cover for you. A skilled Broker will know how to negotiate the appropriate endorsements to tailor the cover to your requirements.
Who can help?
An insurance broker's role is to act as your representative and work in your interests, seeking the best cover at the best price for you from market knowledge. Call a good one.
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