Fire Insurance Policy: A Comprehensive Guide To Fire Insurance Policy

Fire insurance is a type of property insurance policy that protects against damage and loses that are caused by fire.

When you add a fire insurance policy to property or homeowner’s insurance, it can insure you against the cost of rebuilding of property or repair.

It can also protect you against replacement beyond the cap set by the property or homeowners insurance policy.

However, fire insurance policies often indicate general exemptions like nuclear perils, war and other similar risks.

Fire Insurance Policy: How It Works

A fire insurance policy consist of payment for loss of use or extra living costs as a result of unlivable conditions and damages to personal belongings and buildings that are nearby.

Homeowners are strongly advised to document their belongings and its content to make evaluating these items easier in the event of a damage or lost as a result of a fire.

Furthermore, a fire insurance policy consist of extra protection against damages that are caused by smoke and water as a result of fire and such protection is often effective for a year.

Once the policy expires, the policyholder may decide to renew it based on the conditions specified in the policy.

However, some typical homeowners’ insurance policies consist of protection against fire.

If exempted, you may have to buy fire insurance separately, mostly if the property contains high-value items that standard homeowners’ insurance cannot cover.

As such, the policy value limits the insurance service provider’s liability and not the level of damage or loss that is suffered by the property owner.

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What Does Fire Insurance Policy Cover?

Fire insurance policy protects a policy holder against damage or fire loss regardless of the cause of such fire except otherwise stated.

Some of the common causes of fire include electricity such as a wrong wiring or gas explosions and fire caused by lightning and even some natural disasters.

In some cases, excess flowing of a water tank or pipes and even bursting might be included in a fire insurance policy.

Many fire insurance policies provides protection regardless of the location of the fire source either inside or outside a home.

However, the limit of the protection is based on what causes the fire.

The policy is designed to compensate the policyholder for damages.

Such reimbursement could be done in two ways, the first is through a replacement-cost basis, while the second is actual cash value (ACV).  

In the event that the home is viewed as a complete loss, the insurance service provider may compensate the owner based on the current market value.

Normally, the insurance will provide a market value reimbursement for lost belongings, with the entire payout limit based on the home’s entire value.

For instance, if a policy covers a home for $550,000, the contents are often protected for no less than 50-70% of the policy value, or $275,000 to $350,000.

However, several fire insurance policies, limits the compensation they offer for luxury items like gold, paintings, antiques, jewelry or fur coats.

Types of Fire Insurance Policy

Here are the various types of fire insurance policies:

  1. Floating Policy.
  2. Average Policy.
  3. Consequential Loss Policy.
  4. Declaration Policy.
  5. Comprehensive Policy.
  6. Valued Policy.
  7. Sprinkler Leakage Policies.
  8. Adjustable Policy.
  9. Maximum Value of Discount Policy.
  10. Reinstatement Policy.
  11. Add on Covers Policy.
  12. Excess Policy.
  13. Valuable Policy.
  14. Specific Policy.
  15. Escalation Policy.

How often should you assess your fire insurance coverage?

You shouldn’t let your guard down just because you have a fire insurance coverage.

Rather, you should check the value of your home every year to figure out if there’s a reason to increase the protection amount.

No policy holder can get insurance more than their property’s actual value.

Insurance service providers may provide stand-alone policies for unusual, costly items that are hard to replace.

the decision to purchase an insurance policy for your home or any of your high-value items could be one of the best decisions you’ll ever make.

Regardless of how careful you are, it is hard to predict a fire outbreak which can even happen when you are away from home as a result of gas explosion, electricity or even water that comes in contact with electricity.

Williams Oleije

Williams Oleije

Williams Oleije is an Inbound Marketer, and a pop culture enthusiast. He's an avid researcher about how digital media is transforming marketing in several industries.

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