Fire insurance covers damage or loss to a property because of fire. It is a specific form of insurance in addition to homeowner’s or property insurance, and it covers the cost of replacement and repair or reconstruction above what the property insurance policy covers. Fire insurance policies cover damage to the property, and may also cover damage to nearby structures, personal property and costs because of not having the capacity to live in or use the property if damages occur.
The policy typically includes additional coverage against smoke or water damage due to a fire. A fire insurance policy is usually set up for one year. The policyholder may renew the policy according to the terms of the policy.
Some standard homeowner’s insurance policies include fire coverage, but others may not. This coverage may need to be purchased separately, particularly if the property contains valuable items that are excluded from 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 covers a policyholder against fire loss or damage brought about by the ignition of fire, electricity, lightning or explosion of gas, natural disasters, and bursting and overflowing of a water tank or pipes.
Most policies cover a home regardless of whether the fire originates from within the home or from outside the home. Coverage limits are dependent on the cause of the fire. The policy reimburses the policyholder on a replacement-cost basis in the event the property is lost, or on an actual cash value basis for damages.
A policyholder should check his home's value every year to determine if there is a need to increase coverage. He can set coverage limits using factors such as the value of the home and its contents. However, a policy may offer lower coverage limits for certain items, in which case it helps to purchase additional coverage for luxury items such as jewelry, art and other assets.