Fire and Homeowners Insurance

In homeowner insurance speak, a peril is the cause of loss. Coverage from fire is one of the 11 perils typically covered in a homeowner’s policy. In fact, fire is the most common reason for damage to a home. Coverage from fire includes arson, wildfires, or accidental fires.

Your policy will cover fire and related smoke damage. The other perils are:

• Fire and lightning
• Windstorm or hail
• Vandalism or malicious mischief
• Theft
• Damage from vehicles and aircraft
• Explosion
• Riot or civil commotion
• Glass breakage
• Smoke
• Volcanic eruption
• Personal liability

If you have a named peril policy it means that the perils listed are included. If you have an open peril policy it means the perils listed are excluded.

Floods and Earthquakes are usually not covered on a standard homeowner’s policy.

Fire and Homeowner Coverages

Covered items include:

• Dwelling- This covers the dwelling value (not the land).
• Other Structures- This covers other structures not used for business like a garage or shed.
• Personal Property- This covers the possessions (contents) in the home. There are dollar limits for some classes of items (money, coins, jewelry, etc.).
• Loss of Use- This covers expenses related to additional living charges you incur when you’re home is deemed uninhabitable.
• Additional Coverages- This covers expenses for a wide variety of losses including debris removal, identity theft charges, damage to trees and shrubs and removal of property.

Types of Payouts

There are four types of insurance loss payouts:

Replacement cost coverage pays the total cost of replacing your property no matter what the depreciation or appreciation may be.

Extended replacement cost coverage will pay over the coverage limit (up to about 20 percent of the limit) if construction costs have increased.

Actual cash value coverage provides replacement cost subtracting any depreciation that has occurred over the years.  This is actually the market value of the property.

Stated value coverage is usually for personal property such as jewelry or furs. The amount is agreed upon at the beginning of the policy period.

In the event of a fire, household content replacement is calculated as a percentage of the home’s value. With high value items, the insurance may ask that these be covered separately from the other household contents.

Homeowner Insurance Deductibles

When you’re shopping for fire and homeowner insurance, you’ll want to consider the deductible on your policy. A deductible amount indicated how much money you’ll pay before the insurance company begins paying on a loss.

For example, if you have a $250 deductible and your fire loss totals $25,000, you’ll pay the first $250. Your insurance company will pay the remaining $24,750.

One of several ways to lower your premium is to raise your deductible. For example, if you raise your deductible to $1,000 your annual premium may decrease by as much a 20%.

Shop around for the best fire and homeowner policy you can afford. Insurance company offerings can vary widely in coverages and premium.