Like many forms of insurance, fire insurance isn’t usually at the front of your mind… until you need it. Making sure your home and possessions are properly insured in the event of an accidental fire can save you hundreds of thousands of dollars and getting fire insurance is now easier than ever with free quotes and simple policy comparisons, once you know the facts
What is fire insurance?
Almost everyone already has homeowners insurance designed to protect your house and its inventory, as well as auto insurance that protects your car in the event of an accident. However, did you know that many of those policies specifically exclude accidental fire as a covered cause of damages?
Fire insurance may be included in your existing insurance policies as a separate rider offering you all the coverage you need, but it is crucial that you read your policy carefully to be sure you are covered if a fire consumes your home or other valuable property.
Types of Coverage
The most common type of fire insurance is the kind found included in some homeowners policies that extends your existing coverage limits to include damage caused by an accidental fire. If your homeowners policy does not include fire insurance you have two important options.
1 – Purchase a new homeowners insurance policy that does include fire insurance within its stated terms and coverage boundaries.
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2 – Acquire a separate supplemental fire insurance policy that goes alongside your existing homeowners insurance policy to fill in the gap in coverage and keep you financially secure if your loss is caused by an accidental fire that your homeowners policy would not have covered sufficiently on its own.
Fire Insurance for Business Owners
Business owners often require additional levels of commercial fire insurance that go far beyond the sort of coverage a residential policy would include. For example, your company may seek fire insurance coverage that guarantees replacement of inventory in a timely manner, protection against accounts payable or interest payments during an interim period of recovery after an accidental fire, employee health supplemental insurance, environmental cleanup insurance and many other additional elements of real security from loss caused by a fire.
To find exactly the right policy for your business needs, seek a free quote as your first step and then compare the policies offered by a number of insurance carriers. In many cases, choosing the best business insurance fire coverage goes much deeper than the monthly premium pricing. It’s much more about making sure the coverage offered is properly tailored to the ongoing needs of your business before, during and after any incendiary event.
Replacement Cost Versus Actual Cash Value (ACV)
Let’s assume for a moment that a fire has occurred, and that after the insurance adjuster concluded their investigation the company has determined that you are entitled to full coverage for the objects that were destroyed in the fire. Full coverage can mean a couple different things, depending on the verbiage of your fire insurance policy.
Replacement Cost Fire Insurance Policies
Replacement Cost covers the cost of replacing item with the same or similar. That means, if your sweater was burned the company does not need to repair it, or find exactly the same sweater, or pay as much as you paid if they can find a sufficiently similar sweater for less. Often fire insurance companies have relationships with construction contractors and vendors that allow them to rebuild your house for a much lower cost than you may have paid for the house. Under a replacement cost policy the insurance company is under no obligation to refund you the amount you paid for your house, only to rebuild the house in a similar manner to what it was like before the fire.
Actual Cash Value (ACV) Fire Insurance Policies
In stark contrast to a replacement cost policy, an Actual Cash Value (ACV) fire insurance policy, which is sometimes called a market value policy, is the type of fire insurance many insurance companies prefer when reimbursing policyholders for losses. Actual cash value is equal to the replacement cost minus any depreciation. What this means essentially is that instead of having to repair or replace your home after a fire, the insurance company can find the current cash value of the property, the repair cost according to their own calculations, subtract an amount based on the depreciation of the house as an asset since you purchased it and arrive at a total amount due to you. Then make that payment to you in a lump sum and mark their involvement as completed.