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What is Fire Insurance
Fire insurance is insurance to cover property damage and losses caused by the fire. The purchase of insurance in addition to helping homeowners or property insurance to cover the cost of the repair, replacement, or reconstruction of the property, above the limit set by a property fire insurance policy. Fire insurance policies typically contain general exceptions, such as war, nuclear risks and dangers that are similar.
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What is Fire Insurance
Fire insurance is property insurance covering damage and losses caused by fire. The purchase of fire insurance in addition to homeowner’s or property insurance helps to cover the cost of replacement, repair, or reconstruction of property, above the limit set by the property insurance policy. Fire insurance policies typically contain general exclusions, such as war, nuclear risks, and similar perils.
BREAKING DOWN Fire Insurance
Fire insurance policies include payment for loss of use, or additional living expenses due to uninhabitable conditions as well as damage to personal property and nearby structures. Homeowners should document the property and its contents to simplify the assessment of items damaged or lost during a fire.
A fire insurance policy includes additional coverage against smoke or water damage due to a fire and is usually effective for one year. On expiration, the policyholder may renew the policy according to the conditions of the policy.
Some standard homeowner’s insurance policies include coverage for fire. If excluded, fire insurance may need to be purchased separately, especially if the property contains valuable items that cannot be covered with standard homeowner's coverage. The insurance company’s liability is limited by the policy value and not by the extent of damage or loss sustained by the property owner.
Fire Insurance Policy Coverage
Fire insurance covers a policyholder against fire loss or damage from many sources. Sources include fires brought about by electricity, such as faulty wiring and explosion of gas, as well as those caused by lightning and natural disasters. Bursting and overflowing of a water tank or pipes may also be covered by the policy.
Most policies provide coverage regardless of whether the fire originates from inside the home. The limit of coverage depends on the cause of the fire. The policy will reimburse the policyholder on either a replacement-cost basis or an actual cash value (ACV) basis for damages.
If the home is considered a total loss, the insurance company may reimburse the owner for the current market value. Typically the insurance will offer a market value compensation for lost possessions, with the total payout capped based on the home's overall value. For example, if a policy insures a house for $350,000, the contents are usually covered for at least 50-70% of the policy value, or $175,000 to $245,000. Many policies limit how much reimbursement is for luxury items such as paintings, jewelry, gold, and fur coats.
Fire Insurance Coverage Assessment
A policyholder should check the home's value each year to determine if there is a need to increase the coverage amount. A policyholder cannot get insurance for more than a home's actual value. Insurance companies may offer stand-alone policies for rare, expensive, and irreplaceable items.
Source : https://www.investopedia.com/terms/f/fire-insurance.asp