[Practical Finance] Fire Insurance Protecting Your Home and Store Property... How to Enroll

Contact the management office to check group fire insurance coverage
Supplement with personal fire insurance if insufficient... Compensation for furniture, appliances, etc.
Comprehensive fire insurance essential for self-employed workers

As the morning low temperatures drop close to 0 degrees Celsius, chilly weather continues, increasing the risk of fires caused by the use of electrical and heating devices. If there is no proper fire insurance for your home or store in case of a fire, it becomes difficult to bear the damages you suffer as well as the damages caused to others. We examined when fire insurance is absolutely necessary.

Fire Insurance That Protects Your Home Property

Fire insurance is broadly divided into residential and non-residential types. Residential fire insurance premiums and coverage may vary depending on the type of housing, such as apartments, detached houses, or row houses. When subscribing to insurance, apartment owners should check coverage for fire damage to common facilities, while detached house owners should verify whether yards or auxiliary buildings are included. It is also important to confirm whether furniture, home appliances, and valuables inside the house are covered against fire damage. If you have many high-value items, adding a separate special contract is a good option.

High-rise apartments of 16 floors or more are required by the Fire Insurance Act to have fire insurance. Usually, the management office subscribes to group insurance. Group insurance mainly covers fire damage to common facilities of the apartment such as staircases, elevators, exterior walls, and parking lots. It often does not cover personal property such as furniture and appliances owned by the building owner or tenants. Although the premium is inexpensive, usually in the range of ten thousand won, it may not adequately compensate for property damage caused by fire. If you find the coverage of group insurance insufficient, it is advisable to subscribe to individual fire insurance by inquiring at the management office. However, even if you have overlapping individual and group fire insurance, compensation exceeding the actual loss amount cannot be received.

Some apartments below 15 floors also subscribe to group fire insurance at the management association level. However, since it is not mandatory, many do not have fire insurance. In such cases, it is good to prepare individual fire insurance. The same applies to detached and row houses. Individual fire insurance covers fire damage to internal structures and household goods. Depending on your needs, you can expand coverage by adding various special contracts such as leakage, theft, temporary residence expenses, litigation costs, and interior renovation costs.

'Liability Compensation' for Damages Caused to Others

Fire insurance usually includes a fire liability compensation rider. This insurance compensates for damages caused by fire or smoke originating from your home to other buildings or persons. Before the revision of the Act on Liability for Arson on May 8, 2009, there was no obligation to compensate for damages caused to neighbors by fire unless it was intentional or due to gross negligence. However, after the revision, even fires caused by slight negligence require liability compensation.

Fire liability compensation is divided into personal injury and property damage. Personal injury covers the victim's medical expenses, consolation money, disability, and death. The maximum death benefit per victim is 150 million won. Property damage is usually covered up to 1 billion won per accident, but for apartments of 16 floors or more, coverage can be up to 2 billion won. For high-value apartments, premiums may be increased to raise property damage coverage.

For apartments below 15 floors, as well as row and multi-family houses, disaster liability insurance is mandatory, which can be used to compensate for damages caused to others. Disaster liability insurance compensates for life, bodily injury, and property damage caused to others by disasters such as fire, explosion, or collapse occurring at specific facilities. It is similar to fire liability compensation but covers damages caused by natural disasters as well, making it a broader concept.

An illustration created by ChatGPT emphasizing the importance of fire insurance. Provided by ChatGPT

Fire Insurance Is Essential for Self-Employed Individuals

Self-employed individuals also need to prepare for unexpected fires. If you are vulnerable to fire, it is advisable to subscribe to comprehensive fire insurance. This allows you to manage various risks that may occur during business operations with a single insurance policy. For example, general fire insurance only covers direct damage to the store such as facilities, signs, and fixtures caused by fire, but with liability and injury riders, you can also cover damages to neighboring stores or injuries to customers. For restaurants handling gas, coverage related to on-premises explosion and rupture is also helpful. This is because fire insurance for non-residential properties sometimes does not cover damage caused by explosion or rupture.

Such comprehensive fire insurance contracts last from 3 to 15 years. The advantage of long-term contracts is that even if a fire occurs, premiums do not increase until the contract expires. If the scale of the fire accident is less than 80% of the insured amount (the limit of loss the insured suffers in case of an accident), you can receive compensation continuously for multiple incidents until the contract ends.

If you want to minimize premiums, standalone fire insurance is an alternative for self-employed individuals. Comprehensive fire insurance includes coverage that may not be necessary, making premiums expensive. In contrast, standalone insurance focuses only on fire damage coverage, making it relatively affordable. It is also possible to subscribe on a short-term basis with annual renewals, which helps reduce premiums. If additional coverage such as liability, injury, or gas explosion is needed, you can subscribe to optional insurance. However, be aware that if you cancel early, you may not receive a refund of part of the premiums paid, and if a fire occurs during the contract period, premiums may increase significantly upon renewal.