Fire is one of the most common claims that insurers see. Even seemingly “minor” fire damage can have financial consequences. Thankfully, most standard home insurance policies cover smoke and fire damage, up to your policy limits. Your homeowners policy will usually help cover expenses to rebuild your home, replace damaged belongings, and pay for temporary housing if your home is uninhabitable.
In this guide, we’ll explain how your home insurance covers fire damage, what kind of fires are covered, and what to do if you can’t find homeowners insurance due to the fire-risk of your home.
What does home insurance for fire damage include?
Fire is often included in the “named perils” for a HO-2 policy or considered part of “broad form” coverage in a HO-3 policy.
There a few parts of your homeowners insurance policy that come into play when fire damage occurs:
- Dwelling coverage
- Additional structures
- Personal belongings (contents coverage)
- Loss of use
Dwelling coverage can help to reimburse the cost of repairs or rebuilding your home’s structure. You want enough dwelling coverage to be able to rebuild your entire home in the case of a total loss. This includes construction, materials, and labor costs.
There’s no straightforward rule to coming up with this number, because every location, home, and scenario is different. It’s best to ask for estimates from a professional, like a home appraiser, contractor, or independent insurance agent. They’ll give you the closest possible number to the cost of creating a replica of your home, so you can ensure you have enough dwelling coverage in the case of a devastating fire.
Dwelling coverage may also incorporate other fire-related coverage, like debris removal and demolition (if necessary).
High-demand construction costs
Keep in mind that demand for construction and labor goes up after a natural disaster, so the cost of rebuilding will also increase. That means the cost to rebuild due to a wildfire that impacted the whole neighborhood would likely be much higher than an electrical fire in just your home.
In these cases, your current dwelling coverage might not be enough. Some home insurers offer endorsements or add-ons that account for these increases in construction costs post-wildfire. Extended replacement cost can offer an additional 25-50% of the dwelling limit in the case of increased construction costs. Guaranteed replacement cost covers all the reconstruction costs of your home regardless of price. These coverage types are recommended for homes prone to natural disasters and wildfires.
The additional structures policy can help cover other structures on your property aside from the main house, such as detached garages, sheds, fences, or guest homes. The limits for additional structures are usually 10% that of dwelling coverage, so you’ll want to take to an insurance agent to ensure this amount covers all your structures in entirety in the case that they were completely damaged in a fire.
Some policies will even pay for landscaping and shrubbery.
Personal property or contents coverage helps cover your belongings. It’s all the stuff inside your house that would fall out if you took your home and shook it upside down, like furniture, clothing, and jewelry. Not all of your valuables will be covered (like money and collectible stamps), or some forms may have lower limits, like electronics. You may need a supplemental rider to insure your high-cost valuables.
There are two types of pay-outs for personal property:
- Actual cash value covers the estimated resale value if you had sold that item right before it was damaged. This accounts for depreciation as well as the market value of the item.
- Replacement cost covers the full value of your property, without considering depreciation. This is usually more expensive than actual cash value because the reimbursement cost is typically greater.
Make sure all of the items in your home are covered by having an updated home inventory. This should provide an itemized list of your personal belongings along with documented values and receipts, so your home insurer knows exactly what to pay out if something (or everything) is damaged.
Find out exactly how much personal property coverage you really need here.
Loss of use coverage
If a covered fire were to render your house uninhabitable and you have to relocate while it’s being rebuilt, your insurer would reimburse you up to your limits under your “loss of use” or “additional living expenses” coverage. This will help compensate you for any surplus expenses incurred while your home is being rebuilt, like food, lodging, fuel, and laundry. Keep all your receipts for your insurance agent, so they can ensure you are paid in full (up to your limits).
Remember that if you are ever in this case, your loss of use coverage has a limit, so now isn’t the time to splurge on a five-star hotel and nightly steak dinners. Usually your loss of use coverage limits will reflect your average lifestyle for a given period of time.
Home insurance limits and deductibles
An important note to keep in mind is that your home insurance policy has limits. If your dwelling coverage has a limit of $100,000 for example, it wouldn’t cover the costs of rebuilding a $1 million home. You always want to ensure your policy limits are equivalent to your actual insurance needs in-full.
The good news is that for most home insurance, you only have one applicable deductible for fire. So, if your home were destroyed in a fire, you would only pay one deductible for all the applicable policies (like dwelling, contents, and loss of use) and the remainder would be covered up to your policy limits.
Fire insurance for business
In most cases, your home insurance won’t cover any business equipment or structures—even if you work from home. That means that if a home fire destroys your business property, that property wouldn’t be covered.
A basic business owner’s policy will usually cover fire damage, though. Like home insurance, it will help cover the costs of the business’s building, structures, equipment, and inventory.
What types of fires are covered in home insurance?
Home insurance will usually cover most types of home fires, including:
- Candle fires
- Grease fires
- Electrical fires
- Christmas tree fires
- Appliance failures/malfunctions
In a lot of instances, your home insurance will even cover fire damage if the underlying cause wasn’t fire. Let’s say, for example, that an earthquake knocks a powerline down into your house and that starts an electrical fire. Even though most homeowners insurance policies don’t cover earthquake damage, it would likely still cover the smoke or fire damage caused by that downed powerline.
What if I live in a high-risk fire zone?
Unfortunately, some states and regions have a higher risk of fire, and a lot of insurance companies are now choosing to deny coverage to homes in these areas. If you live in certain fire-prone states, like California, you may find it challenging to get homeowners insurance at all, let alone at a reasonable price.
If you can’t find home insurance on the private market, there are other options to consider before you resort to the horrible idea of not insuring your home:
- Talk to an InsuraMatch agent. Our licensed agents believe everyone should have access to homeowners insurance, so we’ll help you shop around to find carriers who will insure you.
- Consider a premier insurance carrier, like Chubb or AIG. These often offer fire-specific services, like private firefighters and loss-prevention, to homes that even may be in high risk zones. However, premier policies are usually only for homes with a certain net worth, usually over $1 million.
- Look into your state’s insurance plans. For example, California has a Fair Access to Insurance Requirements (FAIR) plan that enables basic home insurance for those customers who can’t find insurance on the open market. (These policies are usually very basic and don’t even include theft or water damage, so we highly recommend using this as a last resort or adding on supplemental policies.)
Please don’t give up on buying homeowners insurance if you are denied a few times. In the case of a fire or other detrimental loss, you could lose your entire house and everything you own—and, without insurance, you would be financially responsible for all of it. The purpose of insurance is to protect you from the most disastrous situations, like a fire.
Do I need standalone fire insurance?
Most people don’t need standalone fire insurance since standard home insurance covers fire damage. However, if your homeowners policy doesn’t include fire for some reason (like you are in a high-risk fire zone), then you may be able to purchase additional “dwelling fire” coverage that offers reimbursement for fire, smoke, and explosions.
Do you need home insurance for fire damage?
Fire is one of the most common and expensive claims insurers see. Not having coverage against fire damage can be absolutely detrimental to your home, finances, family, and assets. Please don’t skimp on your homeowners insurance.
Get home insurance now
Home insurance typically covers fire damage. It can be a lifesaver when helping to rebuild your home and fill it with belongings, so you can return to a normal life after a fire.
Not all home insurance is created equally. You want to ensure you’re working with a policy that address your unique risks and covers your entire home and belongings. And you want it at a price that’s right for you!
That’s what our licensed InsuraMatch agents do. We’ll talk through your specific coverage needs, and then we’ll shop around and compare quotes to find the best policy at the best possible deal. We’re not holden to one carrier or package, so you can be certain we’ll put your needs above all else.
Compare home insurance quotes with one of our expert insurance advisors at (844) 300-3237
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