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Does Homeowners Insurance Cover Fire Damage

A home is one of the most significant investments a person can make, so a fire that destroys it and the homeowner’s belongings can be devastating. Fortunately, homeowners insurance protects against fires as one of the main perils of the insurance policy.

Does Home Insurance Cover Fires?

Homeowner’s insurance covers accidental fires in and around the home. What level of compensation the homeowner has depends on which plans they have.

What Types of Fires Are Covered Under Insurance?

A homeowners policy will typically cover accidents and natural disasters that result in fires in and around the home. Accidents can include:

Candle Fires

In situations where a resident accidentally knocks over a candle resulting in a fire, the homeowner’s policy should kick in to replace the damaged things.

Grease Fires

Insureds with gas-fueled appliances typically see damage from grease fires as the flame spreads to anywhere the grease touches. Your homeowner’s policy should cover grease fires. 

Electrical Fires

Damage caused by short circuits or power surges can take down a home’s entire electrical system and cause a fire that can spread throughout the house. A homeowners policy should cover the event of a fire caused by damage to the electrical system.

Accidents also include situations where a power line falls onto your home and sparks a fire, damage to walls or furniture due to smoke, covered explosions, and other falling objects that may cause a fire in the house.

What Is Fire Insurance and How Does It Work?

Fire insurance is property insurance that would financially cover an insured from losing their home and personal property due to an accident or fire caused by faulty wire, gas explosions, lightning, and other accidents or natural disasters.

Personal property is covered up to a percentage of the total dwelling limit that varies from company to company. According to the Insurance Information Institute, coverage is usually between 50%-70% of the dwelling limit.

Depending on the coverage and after a home is considered a total loss by fire, the insurance company will determine how much the home will cost to replace, how much the belongings lost were worth, and will write checks for both values.

Different Types of Home Insurance Fire Coverages

You’ll typically collect the payout for fire coverage in one of two ways: either replacement cost value or actual cash value. The payout method depends on the insured’s option when signing up for coverage. If you have replacement cost value on your policy, the insurance company will pay the total price for buying new items to replace the ones lost in the fire.

If an insured has actual cash value on their policy, the insurance company will pay the insured however much the item was worth at the time of the loss. Considering things like depreciation and general wear and tear usually results in the insured receiving less for the damaged item than it would cost to replace it. 

Dwelling Coverage

This portion covers the home’s structure. Any funds paid out to fix the dwelling would go towards rebuilding the home and any structures permanently attached to the home at the time of loss from the ground up.

Personal Property Coverage

This portion would go towards replacing any damaged personal items due to fire. Personal property includes anything in the home that wasn’t attached to the dwelling at the time of the fire, like appliances, apparel, electronics, and furniture. However, structures unattached to the home, like sheds or detached garages aren’t considered personal property and would be covered under Coverage B, Other Structures.

Loss of Use Coverage

This portion covers additional living expenses from living elsewhere while the home is being rebuilt/repaired. The coverage will include payments for food, lodging, pet boarding, parking fees, and any other reasonable living expense incurred while your house is being repaired. Keep in mind it will not pay for your mortgage or groceries.

Person liability coverage

Personal liability coverage protects the policyholder if a lawsuit is filed against them. Liability coverage will also protect the homeowner from any litigation brought against them and will pay the legal fees.

How Much Homeowners Insurance Coverage Do I Need for Fires?

As a general rule of thumb, the option for replacement value for personal property will usually be more expensive than the option for actual cash value. Still, you can pay less out of pocket if you ever have to file a claim. You should also check additional endorsement limits for items that need to be scheduled separately, such as jewelry, fine art, coins, and furs.

Choosing Your Personal Property Coverage Limit

It’s always a good idea to walk through taking video or pictures of items in your home once every few years and keeping it somewhere safe in case you need to reference them. To ensure you have enough coverage for your items in the event of a loss, you should either keep receipts for your purchases or include a rough estimate of the value of your items and compare the figures directly to the coverage for your belongings.

Choosing Your Dwelling Coverage Limit

The price of a home fluctuates with the market and the materials it would take to rebuild it. Therefore, you should regularly check the cost of the materials required to rebuild your home and compare it to the amount of coverage you have on your policy. If you find that you’re underinsured or don’t carry enough coverage to repair or replace your home after a covered loss, you should reach out to your insurance agent and raise your limits.

All in all, unless it’s explicitly stated otherwise in your homeowners policy, you should assume you are protected in the event of fires. Luckily, you can use the information you learned here to help you better evaluate what coverage gaps you have and how to fill them.