Key Takeaways:
- Fire insurance is property insurance that provides additional coverage for loss or damage to a structure damaged or destroyed in a fire.
- Fire insurance may be capped at a rate that is less than the cost of the losses accrued, necessitating a separate fire insurance policy.
- The policy pays the policyholder back on either a replacement-cost basis or an actual cash value basis for damages.
- Although some homeowners insurance policies include fire coverage, they may not be extensive enough for some homeowners.s
How Fire Insurance Works
Homeowners insurance provides policyholders with coverage against loss and/or damage to their homes and possessions, also referred to as insured property. This is a blanket term used to describe both the interior and exterior of the home as well as any assets that are kept on the property itself. Policies may also cover injuries someone sustains while on the property. If you have a mortgage, there's a very good chance that your lender won't advance your loan if your property isn't covered. Even if it isn't a requirement, it's a good idea to protect yourself. There are additional forms of coverage you can purchase including fire insurance.
Fire insurance covers a policyholder against fire loss or damage from a number of sources. These include fires brought about by electricity, such as faulty wiring and gas explosions, as well as those caused by lightning and natural disasters. A burst and overflowing water tank or pipes may also be covered by the policy.
