Fire Insurance for the Home

When a fire destroys everything, fire insurance pays to rebuild or start over elsewhere.

Fire insurance covers the cost of replacing a building after a fire. It may include the value of items destroyed by the fire. The first recorded fire insurance policies were offered in England after the Great Fire of London. Fire insurance provided the fire insurance policy holder the means to rebuild without losing everything and being left in poverty.

Fire Insurance Policies

Mortgage lenders require a minimum of insurance coverage, which includes replacement of the house in case of fire or other natural disasters. Fire coverage in modern homeowner's insurance policies covers the cost to rebuild or repair the residence and replace major appliances.

Fire Insurance Rates

Fire insurance rates are set based on the risk of fire. These rates also depend on the odds of the home being damaged in a fire. Fire insurance rates are lower for steel frame buildings and higher for wood frame buildings. Fire insurance rates are higher in areas prone to wildfires and with furnaces.

What Fire Insurance Does Not Cover

Fire insurance does not reimburse the homeowners if they intentionally set the fire. Insurance for living expenses in case the home is uninhabitable after the fire requires additional coverage.

References

• "The Mortgage Encyclopedia"; Jack Guttentag; 2010
• "The Student's Guide to Financial Literacy"; Robert E. Lawless; 2010
• "What's Luck Got to Do with It"; Joseph Mazur; 2010
• "Indispensable By Monday"; Larry Myler; 2010

Resources

• "Intermediate Financial Management"; Eugene Brigham, Philip Daves; 2009