How Fire Damage is Handled by Homeowners Insurance Companies

24 Oct
Home fires and homeowners insurance coverage protection

Is my home covered in case of a fire? A standard homeowners insurance policy does covers damage due to a fire.

The fires in California have killed at least 41 people, burned roughly 217,000 acres and completely destroyed 5,700 structures. While there is no way to put a completely accurate figure on the damages just yet, State Sen. Mike McGuire said in a recent interview that damage could easily exceed $3 billion.

We thought this might be a good time to do a general overview of how fire damage is handled by homeowners insurance as well as a few tips for filing a claim if you have been unlucky enough to been affected by a fire.

Insurance and Fires

A standard homeowners policy, an HO-3 policy absolutely covers damage due to a fire. It offers coverage for both your dwelling as well as personal property. In most cases, a homeowners policy will also offer protection for any additional detached structures on your property such as sheds, outbuildings, detached garages and even fences. The majority of policies also cover loss of use if you home is uninhabitable.


Your homeowners policy will cover the cost of rebuilding your home up to the policy limits. The cost to rebuild your home is not the same as the price you originally paid for it because you are also purchasing the land that your house sits on which can be a significant portion of the purchase price.

This means that most people carry policy limits that are less than the purchase price of their home but are sufficient to cover the cost of rebuilding their destroyed home. Your agent can help you determine how much insurance you need to carry by using local construction cost statistics.

However, construction costs can vary and this is especially true in an area that has seen a large number of homes destroyed, as California has recently. Supply and demand (not enough builders or materials) can quickly run up construction costs and there is the chance you will find yourself underinsured. If this happens, you may be funding some of the rebuilding costs on your own.

Personal Property

Your personal property is also covered by your policy up to policy limits. This means that your furniture, clothing, books, cookware, and other personal items will be replaced if they were destroyed in the fire.

Most homeowner policies have personal property limits that are a percentage of your policy limits. While it varies by insurer, in most case it is 50 to 70 percent of your dwelling or structural coverage. As an example, if you are carrying $300,000 in dwelling coverage, your personal property would be covered for at least $150,000.

The majority of homeowner policies have a limit on high value items such as furs, firearms, jewelry, artwork, and collectibles such as wine and even cigars. The value cap will vary but with most policies it is around $1,000 to $2,000. If you have high-value items that exceed this cap you will need to purchase a rider to up your coverage on those particular items.

Loss of Use

If your home is completely destroyed or is unlivable due to smoke damage, your insurance policy should help cover costs such as hotel rooms, eating out at restaurants because your kitchen is destroyed as well as immediately replacing items such as clothing or other necessities.

It Is important to remember that this is not an unlimited pot of money. In most cases it is limited to 20 percent of your policy coverage or a specified dollar amount. Verify the loss of use limits when you make a claim.


As with any insurance claim, your insurance company will require some documentation in regards to your personal possessions. Keeping an up to date personal property inventory is always recommended.

It is best to video or photograph all of your personal property and jot down data such as purchase price, date purchased and serial numbers on high value items such as TVs and other electronics. There are a number of apps available that can make this somewhat tedious process easier.

Always store your inventory off site or in the cloud so it is not destroyed in the fire and you can easily access it if your home is completely destroyed.

Actual Cash Value Vs. Replacement Value

Personal property is covered as actual cash value or replacement value and this can be a major factor, especially if your entire home and all of your personal possessions are destroyed. While a replacement value policy will be slightly more expensive, the benefits can be huge, especially if you suffer a catastrophic loss.

A replacement value policy will pay to replace your items regardless of cost or how old the destroyed item was while an actual cash value policy will take deprecation into account when calculating a payout amount.

As an example, if your TV was 10 years old when it was destroyed, a replacement value policy will replace it with a brand new TV of similar size and quality. An actual cash value policy on the other hand will take depreciation into account which means that your 10-year old TV will be worth almost nothing, meaning you will be replacing it on your own.

If you multiply this by all of the personal property in your now destroyed home, the benefits of a replacement value policy become clear.

Intentional Fires

It is important to remember that intentional fires are not covered if the person who started it is a member of your immediate family. As an example, if an arsonist sets your house on fire, your insurance policy would cover the cost of the damage but if your angry teenager or soon to be ex-wife burns down your house in anger, your insurance company will most likely be denying your claim.

Tips for Filing a Claim

Break Out the Inventory: Now is the time to beak out your home inventory. This will dramatically speed up your claim and will make sure that you are paid out fairly. Send your inventory to your agent as soon as you have made your claim. Update it with any recent purchases that are not on your most recent copy. In many cases, insurance companies will relax their documentation requirements in a massive disaster situation such as the California fires.

Secure Your Home: While many of the homes in California are a complete loss, if you home was only damaged, you should secure it as soon as possible and make temporary repairs to prevent further damage. As an example, if you roof is partially damaged, you would want to cover the damage with a tarp if it is safe to do so. Insurers sometimes deny claims for damage that occurs after the initial issue if temporary repairs are not made.

File a Claim Quickly: Insurance companies can put a time limit on making a claim so file a claim quickly if you experience a loss. While time limits vary it can be as short as a few months or as long as a year. Call and file a claim as soon as you have a loss to ensure you will be covered.

Document Everything: Document your loss with photo and video being sure to take photos from a variety of angles. Forward these to your agent and make sure you keep copies. Document all conversations with your insurer, noting the name and title of the person you spoke with as well as what was discussed.

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