How Does Homeowners Insurance Cover Fire?

Standard home insurance covers fire damage, but less so if you’re in a high fire risk area. This may limit your coverage.

Fire damage coverage is a crucial part of a home insurance policy. It covers the house itself, as well as your belongings, some damage to your neighbors and relocation costs if you need to move somewhere else while the damage is fixed.

Some areas have a high fire risk, which may raise your rates or limit your coverage options. Most states have home insurance options that provide fire coverage to at least cover minimum mortgage requirements. This article will cover:

What fire insurance does my homeowners policy include?

In the event of damage or destruction due to fire, a standard homeowners insurance policy,also known as an HO-3,covers the structure of your home, your personal property, liability and additional living expenses in the event of relocation during repairs. Water damage caused by fire extinguishers is also covered. If you have a named-perils home insurance policy, often known as an HO-2, fire coverage is included as well.

Additionally, smoke damage due to a fire is covered. In some home insurance policies, the costs for removal of debris after the fire is covered as well. An interesting fact about fire insurance is that it covers fire in many cases, even if the cause of the fire is usually excluded by homeowners insurance. For example if a fire starts due to rats chewing through wiring (pest damage is excluded from homeowners insurance), the fire damage would be covered. Home insurance covers wildfires as well.

The following points explain how each coverage type in your home insurance policy covers fire:

Dwelling coverage

The dwelling coverage portion of your home insurance covers the structure and built-in appliances and systems in your home, should they be damaged or destroyed in a fire. For instance, if your roof, deck or water heater were destroyed in a fire, your home insurance will cover them up to your policy's stated limits.

Contents coverage

Also known as personal property coverage, this section of home insurance will replace your belongings such as clothes, furniture and entertainment systems after fire and smoke damage. On average, a home insurance policy covers your belongings between 20% to 50% of the dollar limit of your dwelling coverage.

Other structures

An unattached garage, workshop or gazebo on your property is covered for fire and smoke damage or destruction under your home insurance policy. This coverage is normally limited to 10% of your policy's dwelling coverage. For example, if you have $300,000 in dwelling coverage, your detached workshop would be covered for up to $30,000 of fire damage.

Personal liability

If a fire from your property crosses over to your neighbor's house, your home insurance personal liability covers any legal fees or medical bills that may arise.

Most home insurance policies have a minimum limit of $100,000. If your neighbor is seriously injured by your fire and has an extensive hospital stay, that limit can be hit quickly. Any costs over your home insurance liability limit would be paid out of your pocket. We recommend that you increase your personal liability coverage to at least $300,000, and $500,000 if it works with your budget.

Additional living expenses

Fire damage to your home carries a high chance of you needing to find alternative housing while the damage is fixed, and possibly for a long period of time if your house needs to be rebuilt. Additional living expenses (ALE) is a part of your homeowners insurance that helps cover costs beyond your standard lifestyle expenses. ALE helps with costs including:

  • Hotel or apartment rental.
  • Meals.
  • Laundry.
  • Storage.
  • Furniture rental.
  • Commuting costs.

ALE limits are normally about 20% of your dwelling coverage, usually with a set time limit of 12 months. Some home insurance policies may offer longer time limits.

What fire damage isn't covered by home insurance?

Damage due to a homeowner intentionally setting fire to the house is not covered by homeowners insurance. Fire damage due to negligence or poor maintenance is excluded as well.

If the fire occurs in a home that's been vacant for 30 straight days, the damage won't be covered. If this is a potential issue for you, ask your insurance provider about vacant home insurance.

Fire insurance in high-risk areas

According to the National Fire Protection Association, a home fire occurred every 87 seconds in 2018. There are some parts of the country, such as California, that have a higher fire risk than that. This can make getting standard home insurance coverage for fire difficult, if not impossible.

Your risk for fire is gauged by the ISO fire rating, also known as the Public Protection Classification. The PPC measures your area's capability to control and mitigate fire damage. The higher your rating, the higher your risk. If your area's ISO rating is too high, it may disqualify you from fire coverage through a standard home insurance policy.

But you still have options. Some insurance providers offer standalone fire insurance. Also known as "dwelling fire insurance", this type of insurance policy only covers damage due to fire, smoke and explosions. Some standalone fire insurance policies also cover wind damage. Fire insurance costs less than a standard home insurance policy, but it also covers much less. If you live in a high-risk area, such as a forest, it may be a good option if standard home insurance isn't available.

If standalone fire insurance is unavailable, look into your state's FAIR Plan. FAIR Plans are state-approved insurance programs that were started to ensure that homeowners could get the minimum home insurance they need. FAIR Plan insurance policies are bare-bones in their scope of coverage and may cost more than a standard home insurance policy. As such, a FAIR Plan policy should only be used as a last resort.

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