What Is Explosion Insurance?

Explosion insurance is an extension on a standard fire insurance policy that usually only covers the damage caused by a fire or any type of lightning damage. It is an extended coverage option that costs extra, and is designed to cover a range of what are considered unlikely or uncommon risks. Explosion insurance, therefore, does not specifically cover just explosions alone, but often includes protection for property damage caused by riots, airplane crashes and vehicle damage, or civil disobedience instances. Other more natural types of damage are also covered by explosion insurance and these include smoke damage from a fire and damage from wind, hail, and more. One of the unique areas that this insurance is not specifically designed to cover, however, is that of explosions caused by vessels under pressure, such as steam boilers, for which a separate type of insurance policy is required.

While explosion insurance is often targeted to commercial interests and industries, it can also apply to residential homeowners. Many home insurance policies will cover explosions under the category of fire losses, but this is not always the case, and the average home explosion is often estimated to lead to costs of tens of thousands of dollars (USD) in 2011 figures. Some common sources of home explosions that this insurance would cover include those from propane-fueled grills, oil furnaces, and aerosol cans.

In industrial settings, an extended coverage endorsement on insurance policies for explosion insurance must take into account the industrial setting and various government regulations designed to prevent explosions from occurring. In the US, much of government regulation by the Occupational Safety and Health Administration (OSHA) regarding potential explosions is deferred to the expertise of industry groups like the National Fire Protection Association (NFPA). This is because explosions in industrial environments can have very different causes and sources. The agricultural and food processing industries deal with fine powder explosion risks in the storage and use of milled grain under NFPA guideline 484 and combustible metal powders are regulated under NFPA guideline 664. German guidelines such as Verein Deutscher Ingenieure (VDI) 3673 which has been incorporated into the European (EN) guideline 14491, are also used internationally to govern underwriting procedures by insurers for explosion insurance coverage in powder and dust environments.

Loss of property insurance for explosions that exist outside of the realm of boiler explosion insurance has usually been confined to industries prone to catastrophes. These include natural gas companies and petroleum refining, which are rated among the top ten types of industries most likely to undergo periodic crisis, but this insurance is being increasingly applied to industries that deal with dry powders of various types. It is estimated in the US as of 2005 that two to three significant industrial dust explosions are occurring every day. These types of explosions most often occur in grain silos and dust collection equipment, but they are also common in facilities that do any type of high-speed grinding and blending of fine powders.