fire insurance covers

Fire Insurance in Malaysia: What’s Covered, What’s Not, and Why Your Business Needs It

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Discover what fire insurance covers (and doesn’t), why it’s essential for your business, and how to choose the right policy for maximum protection.

Fire is one of the most devastating risks any property owner or business can face. Whether you own a retail shop, warehouse, office building, or factory, a fire can destroy years of investment in minutes. That’s why fire insurance isn’t just an option—it’s a business necessity.

But what exactly does fire insurance cover? And what common exclusions might leave you unexpectedly unprotected?

Let’s explore what’s included, what’s not, and how you can avoid costly surprises by choosing the right fire insurance for your business.

What Fire Insurance Typically Covers

Most commercial fire insurance policies in Malaysia are designed to offer comprehensive coverage for damage or loss caused by fire and other specified perils.

Here’s what you can generally expect:

1. Fire, Lightning & Domestic Gas Explosion

The core coverage includes loss or damage caused by:

  • Accidental fires
  • Lightning strikes
  • Explosions caused by domestic gas

2. Optional Add-On Perils (Extensions)

  • You can enhance your policy with coverage for:
  • Riot, strike, or malicious damage
  • Earthquake or volcanic eruption
  • Storm, tempest, and flood
  • Bursting of water tanks or pipes
  • Impact damage (vehicles, aircraft, falling trees)
  • Spontaneous combustion (for goods like charcoal or chemicals)  
  • Electrical installation damage
  • Subsidence and landslip

3. Temporary Repairs & Debris Removal

Some policies also cover:

  • Cost of securing the building post-fire Debris removal expenses
  • Rebuilding or repair costs (based on reinstatement or market value)

What’s Not Covered by Fire Insurance

Understanding exclusions is just as important as knowing what’s covered.

Here are common exclusions in standard fire insurance policies:

Theft During or After Fire

Damage or loss due to theft following a fire is not covered unless you have a burglary extension.

War, Terrorism, and Civil Commotion

Losses due to war, terrorism, rebellion, or military action are not included without specific extensions.

Deliberate or Fraudulent Acts

Intentional damage caused by the insured party or negligence with malicious intent will void the coverage.

Pollution or Contamination

If a fire leads to chemical or environmental contamination, cleanup costs are excluded unless specified.

Nuclear Risks & Radioactivity

Any loss caused by radiation, nuclear materials, or related contamination is excluded.

Cyber-Related Incidents

If a fire results from a cyberattack (e.g., hacking that causes system overheating), it’s not covered under traditional fire insurance.

Pro Tips for Business Owners

1) Understand the Basis of Settlement

  • Reinstatement Value: Covers rebuilding to current standards   
  • Market Value: Takes depreciation into account

2) Avoid Underinsurance

  • Ensure your property and contents are insured for the full value. Underinsurance may result in reduced payouts during claims

3) Add Business Interruption Cover

4) Review Your Policy Annually

  • Business needs change—make sure your fire insurance keeps up with new renovations, stock levels, or asset purchases.

Real Case Scenario

Case Study

A local distribution company suffered an electrical fire at its warehouse.

Though the fire was contained, the damaged goods weren’t covered under the policy because spontaneous combustion wasn’t included. The business faced RM100,000 in losses—all avoidable with the right policy extensions.

Final Thoughts

Fire insurance can make or break your business’s ability to recover after a disaster. While basic policies offer solid protection, understanding exclusions and upgrading your plan with the right add-ons is key.

Whether you’re a small business owner, landlord, or commercial tenant, make sure your policy is tailored to your property use, risk level, and business continuity needs.