What Does a Homeowners Fire Policy Cover?

insurance policy forms on laptop with coffee

     Whether you are recovering from a recent fire or looking to insure your next home, it is imperative to understand the details of a homeowners insurance fire policy. Knowing what is and is not covered can help you prepare and decide what additional coverage you may need to purchase. 

     Being familiar with your policy will also help you file the most accurate claim possible, and will serve you well in the event that you need to appeal a decision.

What is Covered for Fire Damage?

  Standard homeowners fire policies typically cover three areas

     1. Dwelling

     Smoke and fire damage to your home and surrounding structures, including the garage and patio, should be covered under a standard policy. This part of your insurance may also help cover living expenses, should your home be uninhabitable.

     2. Detached Structures

     Under the “Other Structures Coverage” part of standard policies, sheds, fences, detached garages, and other areas that are not directly attached to the home may also be covered. Most homeowners insurance policies will also pay to replace damaged landscaping, such as shrubs, lawns, and trees that were ruined in the fire.

     3. Personal Property

     Standard homeowners insurance should cover damaged or destroyed personal belongings, including furniture, appliances, toys, clothing, and electronics. It is a good idea to keep an updated inventory of these items and their estimated replacement costs, since the amount you receive will typically be a percentage of this amount. Be as accurate as possible and avoid over-inflating replacement costs. This can result in a denial of your claim.

How Do Insurance Companies Calculate Fire Settlement Amounts?

     When you initially choose your homeowners insurance policy, you are typically given two options for coverage: Actual Cash Value or Replacement Value.

Actual Cash Value (ACV):

     is the most common and replaces lost items based on a calculation. It takes the initial cost of the item when purchased minus its depreciation in value. ACV will not figure in the cost of a brand new couch, for example. It will cover the cost to replace a couch like yours in the condition it was in when you lost it. 


     offers the full cost to replace a lost item. There is no calculation for depreciation of the item or structure. 

     Both ACV and Replacement are limited by the coverage amounts specified in each policy. ACV is much more common because it is less expensive (up to ten percent less) overall. 

What Happens if I Am Underinsured for Fire Damage?

     Unfortunately, many victims of fire damage are finding they are massively underinsured, especially when it comes to total destruction of the home.

Recent estimates by contractors for replacing homes lost in the Marshall fire, for example, are at $350 per square foot. Meanwhile, individuals are receiving quotes from their insurance companies as low as $215 per square foot. 

     This $135 difference in cost versus coverage adds up. Homeowners looking to replace a 2000 square foot home will need to procure some $270,000 extra in order to fully rebuild. 

     Final insurance determinations are still a ways away, but payouts are projected to be well under what it will take to rebuild homes from the ground up. Federal aid in the amount of 43.6 million dollars should help mitigate gaps in coverage; however, it is likely that many will still be looking at a sizable bill in order to rebuild their homes.

     While being underinsured is considered a valid reason for a lower settlement, you still have the option to appeal a decision, especially if you feel your claim was mishandled in any way. 

Hire a Colorado Fire Insurance Attorney

     A fire is a traumatic, life-changing event. As a policy holder in good standing, the last thing you should have to worry about is an unfair denial or wildly low estimates for repairs. The Roth Group has helped hundreds of clients navigate the insurance claims process and receive a fair settlement.

     If you have received a low settlement offer, your claim was denied, or you feel your insurance has mishandled your situation in any way, please call our office or go online to schedule your free consultation. 


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