What is fire insurance?
Fire insurance is property insurance that covers damage and loss caused by a fire. The purchase of fire insurance in addition to home or home insurance covers the costs of replacing, repairing or reconstructing property, beyond the limit set by the home insurance policy. Fire insurance policies generally contain general exclusions, such as war, nuclear risks and similar risks.
Key points to remember
- Fire insurance is property insurance that covers loss or damage to a structure damaged or destroyed during a fire.
- Home insurance generally covers damage caused by fire, but it can be capped at a rate lower than the cost of accumulated losses, which requires a separate fire insurance policy.
- The policy reimburses the policyholder on the basis of the replacement cost or on the basis of the real cash value (LCA) for damage.
Understanding fire insurance
Some standard home insurance policies include fire protection, but the policy may not be large enough for some owners. If the policy excludes coverage for fire damage, fire insurance may need to be purchased separately, especially if the property contains valuables that cannot be covered by the owner’s standard coverage. The liability of the insurance company is limited by the value of the policy and not by the extent of the damage or loss suffered by the owner.
Fire insurance policies provide for payment for loss of use of property due to fire or additional living expenses which have been necessitated by uninhabitable conditions as well as damage to personal property and to nearby structures. Owners should document the property and its contents to simplify the assessment of items damaged or lost in a fire.
A fire insurance policy includes additional coverage against smoke or water damage from a fire and is generally valid for one year. Fire insurance policies that are about to expire are generally renewable by the owner, under the same conditions as the original policy.
While homeowner’s insurance includes coverage for damage caused by fire, fire insurance provides additional coverage to compensate for additional costs of replacing or repairing property that exceed the limit set by the policy. insurance.
How fire insurance works
Fire insurance covers a policyholder against loss or damage caused by fire from several sources. Sources include fires caused by electricity, such as faulty wiring and gas explosions, as well as those caused by lightning and natural disasters. The bursting and overflow of a water tank or pipes can also be covered by the police.
Most policies provide coverage whether the fire is from inside or outside the home. The coverage limit depends on the cause of the fire. The policy will reimburse the policyholder on the basis of replacement cost or on the basis of a real cash value (LCA) for damage.
If the home is considered a total loss, the insurance company may reimburse the owner for the current market value of the home. Typically, insurance will provide market value compensation for lost property, with total payment being capped based on the overall value of the home.
For example, if a policy insures a home for $ 350,000, the content is generally covered for at least 50 to 70% of the value of the policy or a range of $ 175,000 to $ 245,000. Many policies limit the amount of reimbursement covering luxury items such as paints, jewelry, gold and fur coats.
An insurance policyholder should check the value of the home each year to determine whether it is necessary to increase the amount of coverage. An insurance policyholder cannot obtain insurance for more than the actual value of a home. Insurance companies can offer stand-alone policies for rare, expensive and irreplaceable items that are not otherwise covered by standard fire insurance.