The Importance of Having Fire Insurance Coverage for Your Home

December 26, 2017

Standard homeowners insurance typically covers damage to the home’s structure and its contents due to fires. That’s good then because you have fire insurance technically in place.

Even with the homeowners policy around, you might still need additional fire insurance coverage. Fires can wreak havoc on anything on their path, home structures, belongings, and lives. The recent Thomas Fire that has broken out in Southern California is proof of what fires especially of its magnitude are capable of doing.

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Fires By the Numbers

In your lifetime, you can expect an average of five fires in a space of 15 years, according to the National Fire Protection Association (NFPA).

As of its September 2017 recent report, an average of 358,500 home structure fires has been reported annually in the years 2011 to 2015. That’s three-quarters of all structure fires in the U.S.

The report further notes that the home structure fires resulted in $6.7 billion direct property damages.

Fire Insurance: What Does It Cover

A standalone fire insurance policy is in addition to the property insurance, whether homeowners or renters.

Fire insurance protects against damage to the home structure, its contents and its related structures. However, not all causes of fire are covered by fire insurance packages such as arson and war.

A fire insurance policy may reimburse you for these costs:

  • Replacement costs
  • Repair or reconstruction costs
  • Costs incurred for not being able to use the property because of the damage

For example, your insurer may reimburse you if your house is damaged by smoke or declared a total loss. The reimbursement can be based on your home’s current market value/actual cash value (ACV), or replacement value.

Notably, ACV is the difference between the home’s replacement value and depreciation.

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Because fire insurance plans are renewed on a yearly basis, it would be wise to assess the current value of your home. That way you can appropriately insure your home.

As to personal possessions in the home, having a list of these items makes for easy tracking. Reimbursement on personal property has limits set forth in your insurance policy.

You may have to buy additional coverage or a separate policy for valuables like art pieces and jewelry.

What About Wildfires?

Maintaining fire coverage via homeowners + standalone fire insurance is all for disaster preparedness, too.

Wildfires have burned through So Cal (as of press time, Thomas Fire continues to ignite).

CoreLogic, as cited by Scientific American, estimated it will cost $5 billion to reconstruct homes classified as high risk while the cost to rebuild all homes at risk of wildfires is said to be $27.7 billion.

Either policy covers wildfires; both can boost your coverage against these damaging fires. What your ultimate fire insurance/damage claim depends on your policy’s limits and deductibles.

Whether its smoke damage or total loss, your economic interests in your property and possessions are at your utmost consideration when shopping for fire insurance.

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