how fire insurance works
a standard homeowners insurance policy usually includes fire insurance homeowners insurance provides policyholders with coverage against loss and damage to their homes and possessions also referred to as insured property insured property includes the interior and exterior of the home and any assets kept on the property policies may also cover injuries that someone sustains while on the property if you have a mortgage your mortgage lender will likely require that you have homeowners insurance before it approves the loan even if your lender doesn t require it a homeowners insurance policy can offer beneficial protection you can also purchase fire insurance as a stand alone policy it covers a policyholder against fire loss or damage from a number of sources this includes fires caused by electricity such as faulty wiring and gas explosions as well as those caused by lightning and natural disasters the policy may also cover burst pipes and overflowing water tanks 12example of fire insurancemost fire insurance policies provide coverage regardless of whether the fire originates inside or outside the home the limit of coverage depends on the cause of the fire the policy reimburses the policyholder on either a replacement cost basis or an actual cash value acv basis for damages if the home is considered a total loss the insurance company may reimburse its current market value the insurance typically provides a market value compensation for lost possessions with the total payout capped based on the home s overall value for example if a policy insures a house for 350 000 the contents are usually covered for at least 50 to 70 of the policy value or 175 000 to 245 000 many policies limit the reimbursement amount for luxury items such as paintings jewelry gold and fur coats 3special considerationsa policyholder should check their home s value each year to determine if they need to increase their coverage amount keep in mind that you cannot get insurance for more than a home s actual value insurance companies may offer stand alone policies for rare expensive and irreplaceable items otherwise not covered in standard fire insurance 4many standard homeowners insurance policies include coverage for fire including providing for costs related to repairing your home and even additional expenses such as relocation in some cases you may want more extensive coverage if an insurance policy excludes coverage for fire damage a homeowner may need to purchase separate fire insurance especially if the property contains valuable items that cannot be covered with standard coverage the insurance company s liability is limited by the policy value and not by the extent of damage or loss sustained by the property owner fire insurance can provide extra coverage to offset any additional costs to replace or repair property that surpasses the limit set by homeowners insurance fire insurance policies provide payment for the loss of use of the property as a result of a fire they also often provide additional living expenses if the fire caused uninhabitable conditions finally they provide for damage to personal property and nearby structures homeowners should document the property and its contents to simplify the assessment of items damaged or lost in the event of a fire a fire insurance policy includes additional coverage against smoke or water damage due to a fire and is usually effective for one year fire insurance policies on the verge of expiration are usually renewable by the homeowner under the same terms as the original policy 