According to National Fire Prevention Association statistics for 2016, fires in homes and other buildings caused $7.9 billion in property damage. It’s a staggering amount that reflects how devastating house fires can be. What’s even more alarming is that they can be caused by practically any source that emits heat or conducts electricity. This includes anything from overheated kitchen appliances to random lightning strikes.
While no one plans for these things to happen, you can protect your investment by taking out the right amount of fire damage insurance for your home. Here are five things you should know when you’re seeking the right coverage.
- You need to check that the coverage in your homeowner’s policy is sufficient.
If you already have property insurance, you may already have fire damage coverage, but you should always confirm how much. According to the Insurance Information Institute, the average U.S. fire claim is over $37,000, so make sure you’re protected. If your coverage isn’t sufficient, you can always pay to raise it. We can walk you through what you need.
- Secondary properties should have a dwelling fire insurance policy.
Also known as second home insurance, dwelling policies insure structures on the property against damage and loss due to named hazards (in this instance, fire). Unlike home insurance policies, it does not cover your personal belongings or shield you from liability, so it is not the best option for your primary residence. However, dwelling fire coverage can be a cost-effective way to protect your vacation home or rental property.
- There is a difference between “Purchase Replacement Cost” and “Actual Cash Value.”
If your home is completely destroyed by a fire, a Purchase Replacement Cost Policy will replace the total value, while an Actual Cash Value Policy subtracts depreciation. For example, if your property has depreciated $125,000 since you bought it, you will only receive an amount that reflects the new, depreciated value instead of what you paid for it. Your agent can help you decide which one is better suited to your needs, but both policies are based on the cost to replace damaged property at the time the fire occurs.
- You should take and maintain a home inventory.
If a fire occurs, you want to go by more than a collection of burned items and your memory to file an appropriate claim. A regularly updated home inventory enables you to assign a dollar figure to your losses and be fairly compensated for them. It can also alert you when your current fire insurance coverage is not sufficient, so you can increase it accordingly.
- You should confirm coverage amount for your post-fire living expenses.
Your homeowner’s policy will generally pay your living expenses if you have to live elsewhere while the fire damage is being repaired. The amount you are entitled to is usually 20% of your overall coverage. For example, if your home would cost $500,000 to replace, your living expenses would be covered up to $100,000 in total. Given the fact that you could be living in a hotel or apartment for up to a year (depending on the extent of the fire damage), make sure that this is enough.
If you have questions about the benefits you are entitled to in the event of a fire-related loss, contact The Monfiston Firm at 888-988-FIRM (3476) for a free policy evaluation. We will help you understand the full extent of your policy, ensure that your property is sufficiently covered if the unexpected occurs, and protect your rights if your insurer deals unfairly with you in a future claim.