AS | Ankit Sarawagi|Founder, CFOmatrix·August 2026·9 min read | Business Insurance |
A fire, a burst pipe over a long weekend, a flooded ground floor: the equipment is the obvious loss, but the bigger hit is the weeks you cannot operate while you rebuild. Property and fire insurance covers the first, and Business Interruption cover handles the second.
Fire insurance, more precisely the standard fire and special perils policy, is the property cover that protects the physical side of your startup: the office fit-out, furniture, computers, equipment and inventory against fire, natural perils and, with an add-on, theft. Alongside it, Business Interruption cover replaces the income you lose while you are shut. This guide covers what property insurance protects, how Business Interruption works, why your landlord probably requires the fire policy, the Bharat Sookshma and Laghu Udyam policies built for small enterprises, and how to set the sum insured so a claim actually pays.
- What it covers
- Office fit-out, furniture, equipment and inventory against fire, natural perils and, as an add-on, theft.
- Business Interruption
- Replaces lost income and continuing costs (rent, salaries) while you recover.
- Who often requires it
- Landlords and lease agreements; some commercial contracts and lenders.
- Small-enterprise policies
- Bharat Sookshma Udyam (up to ₹5 crore) and Bharat Laghu Udyam (₹5 to ₹50 crore).
- How to size it
- Reinstatement value of assets, plus a few months of operating costs for BI.
1 What a fire & property policy covers
The workhorse product here is the standard fire and special perils policy, often just called fire insurance. Despite the name, it covers far more than fire. It protects the physical assets you use to run the business, up to the sum insured you choose, on a defined list of perils.
The assets it typically covers:
- The office fit-out and interiors, false ceilings, partitions, flooring and fixtures.
- Furniture and fittings.
- Computers, servers and equipment (portable electronics are often a separate add-on or an electronic equipment cover).
- Inventory and stock, whether raw material, work in progress or finished goods.
- The building itself, if you own the premises rather than rent.
The perils it covers go well beyond a literal fire:
- Fire, lightning and explosion.
- Natural perils: storm, cyclone, flood and inundation, earthquake (often an opt-in), and subsidence.
- Riot, strike and malicious damage.
- Bursting or overflowing of water tanks and pipes.
- Impact damage and aircraft damage.
Theft and burglary are usually not in the base fire policy. They are added as an extension, or covered under a separate burglary policy, so if you hold valuable stock or equipment, confirm theft is actually included.
2 Business Interruption: the cover founders skip
Business Interruption (BI) cover, also called loss of profit cover, pays for the income you lose while the business is shut or running below normal after an insured event. It is bought as an add-on that sits on top of the property or fire policy, and it responds only when the underlying property damage claim is valid.
Think of the timeline after a fire. The property policy pays to rebuild the fit-out and replace the equipment. But for the weeks or months that takes, you still owe rent, you still pay salaries, and your revenue has stopped or slowed. BI cover is what bridges that gap. It typically pays:
- The gross profit or net income you would have earned in that period.
- Continuing fixed costs that run whether or not you are operating, such as rent, salaries and loan servicing.
- Reasonable increased cost of working, for example a temporary premises or rented equipment to get back up faster.
The key parameter is the indemnity period: the maximum length of time the policy will keep paying while you recover, commonly three, six or twelve months. Set it to how long it would realistically take you to be fully back, not to a number that just looks cheap.
3 Why your landlord requires the fire policy
Fire insurance is not mandatory by law for most businesses, but you will very often find it is contractually required. The most common trigger is your office lease. Commercial landlords routinely ask the tenant to carry a fire policy covering the premises and its contents, and to name the landlord or note their interest on the policy. It protects both sides: the landlord’s building and your assets inside it.
Other places the requirement shows up:
- Lenders and lessors: if equipment or the premises is financed, the financier usually requires fire cover with their interest endorsed.
- Commercial contracts: some enterprise or manufacturing contracts require you to insure the assets used to deliver the work.
- Co-working and managed offices: your provider insures the shell, but your own equipment and stock are usually your responsibility.
4 Bharat Sookshma & Laghu Udyam policies
For small enterprises, IRDAI standardised property insurance into two simple, off-the-shelf policies with common wording across insurers. They bundle fire, special perils and a set of add-ons, so you are not negotiating clause by clause, and both carry an in-built Business Interruption option.
| Policy | Who it is for |
|---|---|
| Bharat Sookshma Udyam Suraksha | Micro enterprises with total insured value up to ₹5 crore at one location (building, plant, equipment and stock combined). Standard fire and allied perils plus add-ons in one simple wording. |
| Bharat Laghu Udyam Suraksha | Small enterprises with total insured value above ₹5 crore and up to ₹50 crore. Same structure, higher band. |
Above ₹50 crore of insured value, you move to a tailored commercial property policy (the Bharat Griha Raksha variant is the home version and is separate). For most early-stage startups, whose insured value is well under ₹5 crore, the Sookshma Udyam policy is the natural fit: standard cover, standard wording, easy to compare across insurers.
5 Setting the sum insured
This is where property claims are won or lost. The sum insured should be set on a reinstatement basis, the cost to rebuild or replace the assets with new equivalents today, not their depreciated value in your books. Insure on book value and you will be paid on book value, which rarely covers what replacement actually costs.
For the property side, add up the replacement cost of each asset class:
| Component | How to size it |
|---|---|
| Office fit-out & interiors | Cost to redo the fit-out new (partitions, flooring, false ceiling, electricals). |
| Furniture & fittings | Replacement cost of desks, chairs, storage. |
| Computers & equipment | Cost to buy the same specification new today. |
| Inventory / stock | Value of stock on hand, often set at the highest expected level in the year. |
For Business Interruption, base the sum insured on your gross profit, or as a simple proxy a few months of operating costs (rent, salaries and other fixed costs), scaled to the indemnity period you have chosen. If you pick a six-month indemnity period, your BI sum insured should reflect roughly the gross profit or fixed costs you would lose over six months.
Brewly Pvt Ltd runs a roastery and cafe from a rented unit in Bengaluru. Its lease requires a fire policy on the premises and contents. Brewly totals its assets on a reinstatement basis: fit-out ₹35 lakh, roasting and cafe equipment ₹40 lakh, furniture ₹10 lakh, and coffee stock that peaks around ₹15 lakh, so a property sum insured of about ₹1 crore. Since the total insured value is under ₹5 crore, Brewly buys a Bharat Sookshma Udyam policy, adds the theft extension for its equipment, and notes the landlord’s interest as the lease requires.
Brewly then adds Business Interruption with a six-month indemnity period. Its fixed monthly costs, rent, salaries and utilities, are about ₹12 lakh, and it earns roughly ₹6 lakh of gross profit a month, so it sets a BI sum insured of around ₹40 lakh. When a wiring fault causes a fire that shuts the cafe for eleven weeks, the property policy pays to rebuild the fit-out and replace the roaster, while the BI cover pays the rent and salaries that kept running and the profit Brewly lost during the closure. The asset claim replaced the equipment; the BI claim kept the company alive.
6 Your property & fire insurance checklist
- List every physical asset class: fit-out, furniture, equipment, and stock at its peak level.
- Value each on a reinstatement basis (cost to replace new), not depreciated book value.
- Check your lease for the required fire cover, sum insured and whose interest must be noted.
- Pick the right policy: Bharat Sookshma Udyam under ₹5 crore, Laghu Udyam from ₹5 to ₹50 crore.
- Confirm whether theft and burglary are included or need an add-on.
- Add Business Interruption cover and choose a realistic indemnity period (three to twelve months).
- Size the BI sum insured on gross profit or fixed costs over that indemnity period.
- Buy through an IRDAI-registered broker, and keep the policy schedule and challans for diligence.
Not sure which covers your startup actually needs?
Use our free Startup Insurance Need Checker: answer a few questions about your stage, team, contracts and premises, and get a prioritised list of the covers that fit, from property and fire to D&O, cyber and liability.
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Startup Insurance Need Checker (free tool) →
AS | Founder, CFOmatrix | Finance Strategy & Compliance CFOmatrix helps Indian startups build finance, tax and compliance functions that stand up to investor due diligence, from process and controls to the filings and the numbers behind them. |
Disclaimer: This article is general information as of August 2026 and is not insurance advice. It does not recommend any specific insurer or policy and does not promise that any loss will be covered. Cover, exclusions, sum-insured bands and pricing vary by insurer and change over time; the figures here are indicative only. Confirm your specific needs and policy terms with an IRDAI-registered insurance broker before buying cover.