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Anyone who legally owns a residential property or apartment can purchase fire insurance. Any property is a big investment and when you own one such property, you definitely want to protect it from hazards. Getting fire insurance is a good investment. Fire is a big destroyer and without proper coverage you may face a huge loss that will take a lot of your time to recover.
Fire insurance coverage is only a choice in most cases and is not compulsory. However, for those of you who have your property mortgaged, your lender might require you to own fire insurance policy on the loan amount that is outstanding. Similarly, if your property is mortgaged to any financial institution or a bank, then you will be required by them to own fire insurance policy on the amount outstanding.
What is fire insurance?
Fire insurance is protection from the cost of repairing damages caused by a fire breakout. When you buy home fire insurance protection, it means you are buying coverage for your home when its gets damaged from fire. Fire insurance may be included in some standard property insurance policies. Your home owner's insurance may not cover fire. However, in certain cases fire insurance may be purchased separately. You should check with your insurance providers if fire insurance is part of the policy. If not, then it needs to be purchased. How will you determine fire insurance coverage limits?
If you make a fire insurance claim, the maximum amount you will receive as reimbursement is only the coverage limit. So the best thing to do would be to insure your home for its actual value. When you cover your home the contents of your home are covered for a certain value in relation to the amount your home is insured for. So insuring for the actual cash value would be sensible.
When you buy fire insurance coverage, you are obviously looking for complete protection. Ideally, you should insure your property for its real value. Fire insurance is a multi peril policy and hence your property is entitled to a lot of risk protection. However, one policy will differ from the other in various terms. A typical fire insurance policy usually covers adjacent or adjoining structures too. The exact coverage that you will receive varies from one company to another. Get all possible details from your insurance agent or broker.
How can you judge the effectiveness of a fire insurance policy?
Many of you may already have home fire insurance, but do all of you know what to look for in a fire insurance policy? Not many of us may really know, and this may result in a lot of us being underinsured on the greatest asset - our home. A very important aspect of fire insurance is that it must be strong and sufficient enough to actually replace your home.
The base rebuilding cost is calculated on the square footage of your home. This means we must be fully aware of this measurement. The real estate document given to you at the time of purchase of your home must have the square footage of your home. You can use it for a quick check. You may also find this measurement in the listing agreement or the original listing document for sale or in the closing documents of the house.
What does fire insurance cover?
Usually most of the fire insurance policies cover property damage from:
- Fire
- Riot
- Lightning
- Overflowing/bursting of water reservoirs, pipes and other apparatus
- Damaged sprinkler
- Damage due to smoke
- Damage arising from explosion
- Earthquake, storm and heavy wind impact damage
Fire insurance also covers the contents of your home like carpet, television, books, computer, furniture, lamps, appliances, ornaments, kitchenware and other personal things. Sometimes, certain insurers require you to buy a separate insurance policy for the contents of your home while some insurers offer a combined policy. When buying fire insurance, it is important that you insure your property for the right amount.
What are the mistakes to avoid when buying fire insurance?
You may take a look at the top 10 mistakes people usually make while buying a home fire insurance policy:
- Assuming that the fire insurance policy covers the contents of your house. You should always clarify with your insurance company what a policy covers and not base your actions on assumptions.
- Some people assume that the policy covers the cost of replacing damaged personal property. Make sure to read your policy. There are policies that cover the actual cost value of items at the time they were destroyed from fire because replacement cost coverage usually are a little more expensive.
- Not opting for higher deductibles. If you opt for high deductibles you will get higher discounts.
- Not knowing what the fire insurance policy actually covers. There are certain perils not covered by fire insurance. They are:
- Fire arising from riots or any other civil disturbance.
- Fire resulting from an earthquake or any other natural calamity.
- Theft or burglary during or after a fire breakout.
- You should always check with your insurance agent about the specific coverage options.
- Asking for only one fire insurance rate. You should always shop around if you are looking for the best fire insurance rates possible. Compare several fire insurance policies at the same time to get the best offer.
- Not opting for the same insurance company for another insurance. Opting for multiple insurance from the same company may entitle you to a few discounts.
- Not using fire detectors that help get more discounts. E.g. having smoke, fire and other detectors help get additional discounts from the insurance company.
- Not checking the background of an insurance company before purchasing a policy. A company that is not financially stable will give you trouble when you have to file a claim.
- Not having a written or video inventory of the belongings of your home.
How should you file a fire insurance claim?
Policies may differ from one company to another and hence the procedures may also be different. When you file a claim, your insurance company will need certain information. These may include:
- Date when the loss occurred.
- What was the kind of damage that incurred?
- Place where damage occurred.
- Was there any injury that was inflicted?
- Were there other people involved?
- What is the condition of your home?
- A description of the contents damaged in the fire.
- Copy of the police report filed.
- Are temporary repairs required?
A police report may be required by your insurance company and the more documentation that you have the better for you. Although fire insurance is only a matter of choice, but it is also a sensible investment. Loss from fire is a permanent loss and to recuperate from the loss may become difficult unless you have that strong financial stability. Hence, investing in fire insurance is a good idea. Get all information from your insurance agent and ask him as many questions as you want. After all it is your biggest asset that you want to protect.
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