Keeping Your House Safe With Fire Insurance
According to statistics, there are over 350,000 house fires every year. Is your house insured against fire damage? You may want fire insurance if you desire coverage for damages or losses to your property brought on by a fire.
Your insurance will pay for repairs or replacing damaged property in your home. Most homeowner’s policies include fire insurance with varying degrees of inclusions and exclusions. Here is what you need to know.
What is covered and what is not
Your homeowners insurance will pay for fire damage to your home including damage to your property and the contents of the building. If you have coverage for additional living expenses or ALE, your insurance will also pay for your living expenses if you need to stay elsewhere while your home is being repaired: hotel bills, food, meals, and other expenses are covered. Check with your policy if you have ALE. It can be stressful to pay for living expenses if you are forced to find temporary living arrangements after your home suffered from a fire.
Sheds, fences, and detached garages are also covered by most policies. Some even pay for landscaping costs like damage to trees and shrubs. However, if your car is destroyed during the fire, it is not covered by the homeowners insurance. It will only pay for the damage to your home up to the limits of the policy for fire damage. Other common exclusions are arson, if your home is vacant for more than 30 days at the time of the fire, and damage caused by war, nuclear damage, and other associated perils.
What about wild fires?
Due to climate change, wild fires are becoming more frequent. Most fire insurance policies cover wild fires. It pays for home structural damage, rebuilding costs, and necessary repairs if it is still standing including remediation of smoke damage.
Pay attention to the insurance pay out: does it pay based on actual cash value or replacement cost for property damaged during the fire? If the coverage is only actual cash value, it may not be enough to replace your items lost in the fire with today’s market value. If this is a concern for you, consider adding an optional endorsement to your policy and add replacement cost.
This concept is also important when you are doing the math in rebuilding 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.
Check with your needs and budget to see if a replacement cost makes more sense for you. It usually costs 10% more than a policy with only actual cash value replacement option so think about it and identify what kind of fire insurance is more suitable for you and your family.