What is Covered by Fire Insurance?

Types of Fire Insurance Coverage

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Getty Images/Michael Blann

 

Did you know that the National Fire Association statistic show over 358,000 house fires each year? It is important to know what insurance coverage you have that will cover fire damage. Fire insurance is a property coverage that pays for damages to property and other losses you may suffer from a fire. It can pay for the cost of repairing or replacing damaged property in your home. Fire coverage is included in most homeowners insurance policies. However, there are certain exclusions to coverage. There are set limits to the amount of fire damage that will be covered in a homeowners insurance policy.

Important Exclusions to Coverage

Your homeowners insurance policy will pay for damage to your home up to the policy limits for fire damage. Most policies exclude damage caused by war, nuclear damage and other associated perils. Arson is not covered. Arson is when a home is deliberately set on fire by the homeowner. Fire damage to a vacant home is also not covered if the home was vacant at the time of the fire for more than 30 consecutive days. A “vacant homeowners insurance policy” can be purchased if you need to cover a vacant home.

Types of Coverage

Your homeowners insurance will pay for fire damage to your home including damage to your property, the contents of the building and additional living expenses if you need to stay elsewhere while repairs are made to your home. Additional living expenses (ALE) is a great coverage option to have. It covers hotel bills, food, meals and other living expenses you may have while unable to live in your home. Without the coverage, many families would have a hard time paying for living expenses if they were forced to find temporary living arrangements after a home fire.

Any detached structures located on your property such as any sheds, fences or detached garages are also covered by most homeowners insurance policies. Some policies will also help pay for landscaping costs such as damage to trees and shrubs.

One important note—if your car or other vehicle is destroyed or damaged due to a fire at your home, this is not covered by homeowners insurance. The cost of fire damage to your car is paid for by the comprehensive portion of your auto insurance policy. If you only have liability auto insurance coverage, damage to your car during a home fire is not covered.

Are Wildfires Covered?

The occurrences of wildfires are growing at an alarming frequency. It is important to make sure you are prepared with adequate insurance coverage for wildfires. Your homeowners insurance policy will cover damage to the structure of your home caused by a wildfire. This includes the cost to rebuild your home if it is destroyed by the fire or to make necessary repairs if it is still standing including remediation of smoke damage.

Fire Insurance for Business Owners

Fire damage to a business is typically covered in the basic business owner’s policy (BOP). This includes damage to your business building, attached/detached structures, office equipment, and inventory. Most business owner’s insurance policies will also pay for additional operating expenses if you must move your business operations to a temporary location. It is important to keep an up-to-date inventory of business equipment and other valuable business items. You should also keep important documents offsite, so they are not destroyed in a fire.

Replacement Cost Versus Actual Cash Value (ACV)

It is important to know if your insurance policy pays actual cash value (ACV) or replacement cost for property damaged during a fire. If you only have ACV coverage through your homeowners insurance, this may not be enough to replace the items you lost in a fire at today’s market value. Sometimes, you can add an optional endorsement to your policy to add replacement cost.

Actual cash value versus replacement cost is also an important consideration when you consider the cost to rebuild your home. The cost to rebuild may be significantly greater than the home’s actual cash value. The replacement cost option will allow you to replace your damaged items with a new item of similar quality and cost. A homeowners policy that offers replacement cost generally costs about 10 percent more than a policy with an actual cash value replacement option.