Fire Insurance Explained

After reading the title to this article you may be curious as to what fire insurance is. By definition, fire insurance is a type of property insurance that specifically covers damages and or losses that are caused by a fire. Property insurance policies typically include some form of fire insurance protection. However, property owners can purchase additional coverage in order to ensure that they will be fully protected in case of a fire. In essence, adding a fire insurance policy will help you to cover the costs of repair or replacement of your real estate if it ends up being more expensive than the limit set by your property insurance policy.

A fire insurance add on policy protects you against fire damage or total loss from numerous sources. For example, your policy will cover you if the fire was started due to an issue with the electricity such as faulty wiring. It also covers you if there is a gas explosion, lightning strike, and or other natural disasters. The vast majority of fire insurance plans cover you whether or not the cause of the fire starts inside or outside of your property. That being stated, the limits of your coverage typically depend on the actual cause of the fire.

Your fire insurance policy reimburses you on a replacement cost basis or an actual cash value basis for any damages that are caused by the fire. However, the policy may reimburse you based on the property’s market value if the fire causes a total loss. A total loss means the property has either burnt to the ground or there are no parts that can be saved. Regarding lost possessions, your fire insurance policy will usually reimburse you for those items based on their current market value. However, the total payout is typically capped based on the property’s overall value. Here’s a good example.

If the property is insured at $500,000, the contents are typically covered at 50% to 70% of the value of the policy. In this case that would range anywhere from $250,000 to $350,000. It should be noted that most fire insurance programs allocate a limit to the amount of reimbursement you will receive for luxury items such as jewelry and works of art. You should review the value of your property each year in order to determine if you need in increase the fire insurance coverage amount.

This holds especially true since we are currently experiencing a real estate market that is rapidly increasing in value. You certainly do not want to have your real estate undervalued in regards to your fire insurance policy.

If you own real estate in the Commonwealth of Massachusetts you need to ensure that you have the proper fire insurance coverage in place. Please consult with a professional insurance agent that can answer your questions about all insurance related topics. It is important to fully understand exactly what you are buying when it comes to insurance policies. If you have any questions, please call (508) 831-0133 to contact an associate at Zawada Insurance. We are happy to walk you through the details of your insurance policies and explain your coverage options.

We look forward to helping you with all of your personal and or business related insurance needs now and in the future.

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