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Fire Insurance

Fire insurance is able to provide coverage for loss or damage caused by a fire. There are certain risks that this type of policy will cover, and also various exclusions that will not be covered. Unfortunately, you are unable to insure your property or possessions against every type of risk. If your home has been involved in a fire, your fire insurance policy will provide protection to the estimated value of the physical structure. However, there are numerous exclusions which may include medical bills, loss of personal belongings, structures outside the property such as garages and loss of human life or pets. Protection of these named factors will typically be covered within an extended property insurance policy.

There are various types of fire insurance policy and these include:

  • Comprehensive policy - this type of policy will protect you for any loss arising from fire, burglary, theft and even third-party risks. A comprehensive policy will also provide a business owner coverage for loss of profits that may be incurred due to a fire, and this will be paid for as long as the business remained shut.
  • Specific policy - this type of policy will typically pay an amount lower than a property‚Äôs actual value. In fact, this policy will not actually consider the value of a property in order to determine the indemnity.
  • Valued policy - a valued fire insurance policy will have a fixed indemnity, or insurance value. This is fairly different to a standard insurance policy, and the actual loss amounts will never be taken into consideration.
  • Floating policy - a floating fire insurance policy will extend coverage to various properties that belong to the policyholder. This will be covered under one contract and one premium. This will enable the policyholder to have coverage for goods that are perhaps kept in two different locations.
  • Replacement or reinstatement policy - this type of fire insurance policy will have a very specific reinstatement clause. It is therefore a requirement for the insurance company to pay for replacing a damaged property. Often, this may mean rather than paying out cash, an insurer can reinstate a property as an alternative.

Fire insurance policies will generally have four different coverage areas. To ensure that you have all four different coverage areas protected, you will typically need an extended property insurance policy. Firstly, there is the dwelling portion which directly refers to the home. Secondly, there are the rebuilding expenses which will be calculated based on the square footage of a home. There is also a section in this portion that will refer to other structures that will typically cover garages or sheds that do not form part of the actual dwelling itself.

Next we have personal property which will generally include all the contents within the property, but do not form part of the actual dwelling itself. This may include furniture, clothing, jewelery, computer equipment and electronics. If you believe you have certain personal property items of considerable value, you should always list these separately on your fire insurance policy. If they are not listed separately you will simply be compensated with a standard amount.

The fourth and final coverage area will specifically relate to any additional expenses that exceed your normal cost of living, due to the results of fire damage. This may involve the expenses of temporary accommodation, due to the fact you are unable to live in your home for an extended period of time. There will generally be a limit set for your additional expenses, and these are typically reimbursed at a later date.

When you make a claim to your insurance company you should be aware that they will pay for losses that are generally based on an actual cash value or replacement value. The actual cash value is commonly referred to as the fair market value of your home at the time that damage or loss occurs. However, replacement value will compensate you for the entire cost of replacing, repairing, or rebuilding your own. You will often find actual cash value can be significantly lower than replacement value, and therefore you will generally find that replacement value policies are more sought-after.

You will also find that the vast majority of fire insurance policies will provide coverage for water damage that is a result of the process of fighting the fire. This will include water damage that is created by a fire hose or even a broken pipe. Most insurance policies will also have a stipulation relating to building code upgrades. A prime example of this is if current building codes specify that you must have a certain material, but your home previously had a substandard quality of this material, you as the homeowner would need to account for this discrepancy in cost during the repair process.

As you can see, a fire insurance policy is an extremely specific type of property insurance. It will cover you in the event that your home is lost or damaged during a fire, and is most often included as part of a homeowner's insurance policy.

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