What Does Fire Insurance Cover?
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Generally, fire insurance covers losses to your house itself and the property within it from damage due to fire. Most homeowners and renters have sufficient protection against fire damage through standard home or renters insurance, as fire coverage is included in these policies.
But people who live in areas at high risk of fire may want or need to purchase separate fire insurance coverage to protect their property. Home insurance companies sometimes exclude homes at high risk of fire from standard fire protection, so it's important to check your coverage.
How does homeowners insurance cover fire and smoke damage?
Fire insurance coverage is included in the vast majority of standard homeowners insurance policies. It's included in even the most basic type of home insurance, HO-1, as well as more robust policy types including HO-3 (the most common type of home insurance) and HO-5 policies.
Fire damage is covered even if the underlying cause of the fire is excluded from your policy. For example, if an earthquake, which is not covered under some policies, knocks down an electrical line and sets your home on fire, you would still be able to make a claim.
Generally, fire insurance covers more than just things that are burned. Much of the damage fire causes to homes and properties is from smoke, which can damage walls, furniture and other objects. This is usually covered by standard home insurance, too.
Like any other perils covered by your home insurance policy, fires are covered up to your coverage limits, minus your deductible.
For example, suppose your home itself is worth $200,000 and your belongings are worth an additional $100,000. If you had $300,000 worth of homeowners insurance with a $1,000 deductible, you would receive $299,000 from your insurance company if your house burned down and all the property inside was destroyed. If you had only $200,000 worth of coverage, you'd only receive payment up to that limit, but if you had $400,000 of coverage, you would still be paid $299,000.
How coverage limits and deductibles affect fire insurance payouts
Coverage limit | Home and property value (combined) | Deductible | Amount paid by insurer |
|---|---|---|---|
| $300,000 | $300,000 | $1,000 | $299,000 |
| $400,000 | $300,000 | $1,000 | $299,000 |
| $200,000 | $300,000 | $1,000 | $199,000 |
Fire insurance typically covers damage to your home and property even if you accidentally cause a fire. In fact, most home fires are caused by people, whether due to an unwatched candle, an electrical spark or a cooking mishap. Damage caused by these events are all covered. What's not covered, however, is a fire caused intentionally or due to gross negligence.
Here's a breakdown of how standard homeowners insurance coverages may take care of financial losses you experience as a result of a fire:
- Dwelling coverage: This covers the cost of repairs to the singed or burned-away portions of the house. If your house is completely burned to the ground, your insurer will pay you a lump sum for the house, up to your limits. This also covers smoke damage to the house itself. Payment is typically either for the actual cash value or replacement cost.
- Personal property: This pays to replace your clothing, furniture and other belongings after a fire. Valuables may be treated differently, as expensive items typically have limits set per item. TIP:Make sure your home insurance policy provides enough coverage for all your valuables. You might need to add a schedule or endorsement to fully cover things like jewelry, firearms or art.
- Liability protection: This protects against lawsuits and related damages for a fire that spreads from your house to a neighbor’s property.
- Loss of use or additional living expenses: Your insurer will reimburse you for temporary lodging and food costs during your evacuation, usually for anywhere from 10% to 30% of the dwelling limit. What's considered an allowable expense differs by insurance company.
Keep in mind that most, but not all, homeowners insurance policies include all of these coverages. Check your policy for the exact protections you have.
Can I buy standalone fire insurance?
Yes. In addition to coverage provided under standard homeowners or renters policies, some insurers provide policies that primarily or exclusively cover damage related to fire. Those policies are usually called "dwelling fire" coverage and include protection against fire, smoke, explosions and sometimes wind. Since dwelling fire coverage does not cover as many perils as standard homeowners insurance, it usually costs less than an HO-3 or HO-2 policy.
You might consider purchasing standalone fire insurance instead of traditional home insurance to insure a property that is very old, with fewer fire mitigation features. Or you might add it to a secondary residence or vacation home, which can sometimes be difficult to insure.
Additionally, adding a dwelling fire policy can be used to supplement your existing homeowners coverage. This could be because you live in an area susceptible to forest fires, or you may have simply experienced fire loss in the past and want extra peace of mind.
How to insure a home at high risk for fire
If you live in a house with an exceptionally high risk of fire, you may find that a home insurance company may not offer you insurance coverage or decline to renew your policy. This might be because you are too far from a fire department, your home is too close to brush or you live near a canyon, which can funnel winds and create large wildfires. Unsurprisingly, these conditions are common in California, which has experienced a record number of wildfires in recent years.
If you're unable to get standard home insurance because of fire risk, you may still be able to buy a FAIR insurance policy.
FAIR policies are government-backed insurance policies available in most states for homes that don't qualify for insurance on the open market, whether due to fire likelihood or another risk, like flooding.
Be aware, however, that FAIR insurance plans are generally no cheaper than privately sold insurance plans and often have less coverage than standard plans. For example, FAIR coverage in California only covers damage due to fire and smoke, but not other perils like water damage or theft. As such, if you can get fire insurance from another source, it's likely a better option.
One option for homeowners who live in high-risk areas is a hybrid plan that combines a FAIR plan and a standard insurance policy. In these plans, your home is covered by FAIR for fire damage only. Then, you purchase a separate policy for the other types of coverage in standard homeowners insurance, such as damage from theft and liability protection. These plans are sometimes called difference-in-conditions (DIC) insurance.
Before you commit to a FAIR plan, make sure to check for quotes from several standard home insurance companies. Every insurer evaluates risk differently, and just because one company denies you doesn't mean another will.
Talk to your neighbors about which insurers they use, too. Their homes likely have similar risk profiles as yours, so a company willing to insure their homes may be likely to insure yours as well. Or work with an insurance agent. They can help you find an insurance company in your area that is most likely to offer you coverage.
Denied fire insurance claims: Why it happens, and what to do
If your home is damaged in a fire and you make a claim, there's a chance it won't be approved by your insurance adjustor. In general, this is because the claim you filed violated the terms of the policy you signed.
Every claim situation is different, but there are some common reasons your fire insurance claim is partially or completely denied:
- Vacant home: Homes that don't have anyone living in them aren't covered by insurance, unless you have a special policy for vacation homes.
- Electrical work that isn't up to code: A fire is caused by wiring in your home that doesn't conform to your area's building codes.
- Nonpayment: Your home insurance policy is inactive because you haven't paid the bill.
- Illegal activity: Evidence of illegal activity is found, such as manufacturing drugs.
- Arson: Your insurer suspects you set the fire intentionally.
- Fraud: Your insurer believes you intentionally lied or misrepresented something about the claim, such as the value of your property.
- Underinsured: The total coverage amount of your homeowners' policy isn't enough to pay to replace or repair all your belongings. (In this case, you'd be reimbursed up to your policy limits.)
What to do if your fire insurance claim is denied
The process of disputing a rejected fire insurance claim is the same as for all denied insurance claims:
- Review your insurer's denial thoroughly. After denying your claim, your insurer will send you a detailed explanation describing what they found and why your claim was denied. Before you proceed any further, it's essential to review this carefully so you can decide whether to proceed. ~
- Go through your insurer's appeal process. Home insurers are required to allow you to appeal their decision. They will recheck the numbers and address any issues found. However, there's no guarantee that they'll find in your favor. ~
- File an official complaint and contact a lawyer. If your insurer still denies your claim after an appeal, your main recourse is to begin a lawsuit. Contact a lawyer so they can review your claim and help you decide whether you're likely to win a lawsuit. You should also file an official complaint with your state Department of Insurance.