Fire insurance policy usually covers fire due to any cause, subject to some exceptions which too may be covered with additional premium. These policies may be extended further to include collateral damages or losses such as loss of income.
A fire insurance policy usually has four different coverage areas. The dwelling portion refers directly to the home itself. The coverage for the dwelling should always be enough to adequately replace the home. Rebuilding expenses are often determined based on the actual square footage of the home in question. The portion referring to other structures includes the coverage of garages or sheds that are not part of the dwelling itself and are considered a separate area.
Personal property is considered a separate coverage area as well and includes the contents within the home that are not part of the dwelling itself, for example furniture, electronics, computer equipment, clothing and jewelry. Personal property items of considerable value should be specifically listed as part of the fire insurance policy, items that are not explicitly valued tend to be compensated with a “standard” amount.
The fourth area of coverage due to the additional costs that exceed the normal costs of the insured person lives in a fire. This can refer to the expenditures of temporary housing among other things, all incurred when forced to live away from your residence during the process of rebuilding or repairing. These expenses need to be documented in order to receive reimbursement later. Usually there is a limit set for additional expenses claimed.
Main types of Fire Insurance policies:
- Specific Fire Insurance Policy: The insurer is liable to pay a set amount lesser than the property’s real value. In this policy, the property’s actual value is not considered to determine the indemnity. The average clause, which requires the insured to bear the loss to some extent, does not play a role in this policy. In case the insurer inserts the clause, the policy will be known as an average policy.
- Comprehensive Fire Insurance Policy: This all-in-one policy indemnifies for loss arising out of fire, burglary, theft and third party risks. The policyholder may also get paid for the loss of profits incurred due to fire till the time the business remains shut.
- Valued Fire Insurance Policy: This policy is a departure from the standard contract of indemnity. The amount of indemnity is fixed and the actual loss is not taken into consideration.
- Floating Fire Insurance Policy: This policy is subject to the ‘average clause’. The extent of coverage expands to different properties belonging to the policyholder under the same insurance contract and one premium. The policy may also provide protection to goods kept at two different stores.
- Replacement or Re-instatement Fire Insurance Policy: This policy is subject to the re-instatement clause, which requires the insurance company to pay for replacing the damaged property. So, instead of giving out cash, the insurer can re-instate the property as an alternative option.