Definition: Fire and special perils policy is an insurance contract that safeguards the insured against unforeseen contingency caused by accidental fire, lightning, explosion/implosion, destruction or damage caused by aerial devices, man made perils in the form of riots, strike etc, natural calamities like storm, cyclone, flood etc, damage caused by impact by a rail or a road vehicle, damage cased by landslide or subsidence, peril caused by pollution and contamination, bursting and/or overflowing of water tanks, apparatus and pipes, missile testing operations, leakage from automatic sprinkler installations and bush fire.

Description: It is a contract wherein the insurer guarantees to pay for the loss and damage happen to the property for the specified period of time (normally the fire policy is a one year policy and renewable annually). The valuation of assets is made according to the market value. The value factors in both the depreciation as well as the appreciation of assets due to inflation.