Fire Insurance Coverage 101: Know What Your Fire Insurance Covers

Model of a house with flames on the roof

When there is a fire in your home, the damage can make the property unlivable, displacing your family into a temporary rental for months while you repair and rebuild. During that time, you rely on your home insurance to rebuild your home so you are able to get back to everyday life with your family. It helps to understand your fire insurance coverage, know what’s covered, and how much you can expect to receive.

What Is Fire Insurance Coverage?

Your home fire insurance policy will pay out when there is damage to your home caused by a fire. That includes accidental fires and fires caused by natural disasters. It is part of your general home insurance policy, which also covers perils such as:

  • Extreme weather like wind and hail;
  • Theft and vandalism;
  • Personal liability;
  • Water damage;
  • And earthquakes.

You may have a Named Peril policy that lists those sources of damage that are covered or an All Risk policy, which covers every potential loss that is not explicitly excluded.

What Does Basic Fire Insurance Coverage Include?

The three main areas of fire insurance claims are Structure, Contents, and Additional Living Expenses. Between these three areas, the expenses incurred by the fire should be reimbursed by your insurance claim, but the amount may depend on the types of coverage you have and the extent of the damage.

Below you can find a detailed breakdown of each type of coverage.

#1 Structure

Structure coverage pays for the repairs made to the physical structure of your home. Depending on your coverage, it may also help pay for damage done to exterior buildings such as a shed or a garage as well. Homeowners and landlords will have this type of fire insurance coverage, but tenants typically do not. Instead, renters insurance covers personal contents, liability, and additional living expenses resulting from displacement.

The costs covered by this part of your fire insurance policy should include:

  • Interior and exterior damage to your home;
  • Repairing or replacing windows, doors, and the foundation;
  • Repairing or replacing flooring;
  • Replacing fixtures (i.e., plumbing fixtures or lighting) damaged by fire and flood.

However, costs such as property taxes and mortgage payments are not included in your fire insurance coverage. You must keep up with these payments on your own.

Another element of Structure coverage is what happens when you need to account for new bylaws or building codes. When you rebuild or renovate your home, you have to update any element that is not up to code, even after a fire. This is addressed under bylaw coverage, but if you don’t have it, you may have to pay the difference out of pocket. Check your policy to see if you have bylaw coverage that will help you pay to rebuild your home to code.

When extensive damage has been done to your home, the insurance company will get several quotes from contractors and typically go with the cheapest option to do the repairs. This is what they base their settlement offer on. It’s important to make sure that all of the necessary repairs are included in this quote. This is one area where an insurance lawyer can help by pushing back against the insurance company when you feel important costs have been excluded. An insurance lawyer will pursue your interests and enter negotiations with the adjuster if their offer is unreasonable.

A contractor works on repairs

#2 Personal Contents

This area of your fire insurance policy covers personal property and contents damaged or lost to the fire. These are the things that were inside your home when they were damaged by smoke, flames, or water. It does not include building materials like windows or fixtures, which would be covered under structural expenses. It likely covers personal belongings, including:

  • Electronics like laptops, TVs, or home theatre systems;
  • Clothing and linens;
  • Furniture;
  • Entertainment media like DVDs or books;
  • Dry, wet, and frozen food.

When it comes to certain valuables, there may be special limits that apply. For example, you may require extended coverage to fully insure a jewellery collection.

You will need to draw up a list of personal contents lost in the incident and submit it to the fire claims adjuster. This is called a Schedule of Loss. This can be a lengthy process, and in order to speed things up, you can sign off on an interim Schedule of Loss and potentially receive an advance. An advance will help you start replacing immediate needs, such as clothing and computers for work or school.

The amount you receive from the personal contents part of your insurance coverage may depend on whether you have replacement value or actual cash value coverage. Actual cash value coverage will give you what the item was worth at the time of the loss, accounting for depreciation. Replacement value will cover the costs of replacing the item at today’s prices.

For example, if you owned a 5-year-old television you paid $500 for originally, actual cash value coverage may only give you $100. Replacement value would give you that model’s present-day price.

A significant problem that arises is that homeowners cannot utilize a good chunk of their coverage unless they replace the item. This issue can be navigated by an insurance lawyer who can try to negotiate for a global cash settlement.

Paying for Smoke Damage Restoration

When it comes to Contents insurance, one thing homeowners should be cautious of is smoke damage restoration. In some cases, the insurer may push for smoke damage restoration with the hope that it will be cheaper than replacing all of your lost belongings. In other cases, homeowners themselves want to pursue smoke damage restoration because they want to try to restore objects with sentimental value.

Anything with fabric will be very difficult to restore, which means that it can be an expensive mistake to attempt to restore things like clothes, children’s stuffed toys, wedding dresses, or upholstered furniture. They can be cleaned and deodorized, but it may depend on the extent of the smoke damage and how much time had passed before restoration was attempted.

This is important because the cost of smoke restoration can be taken out of your Contents payout. If the attempt is unsuccessful, you can be left with fewer funds to replace your lost belongings.

If the insurer insists on an attempt at smoke damage restoration and the attempt is unsuccessful, you may need to push back to ensure that you don’t have to pay for it.

At the top of the list of what not to do after the house fire is attempting smoke damage restoration without consulting the insurance company. Any repairs you attempt to make without the insurance company knowing about it will likely not be covered. Personal belongings removed from the house after the loss may not be included in your insurance claim at all.

Smoke setting off a fire alarm

#3 Additional Living Expenses

The Additional Living Expenses (ALE) section is sometimes called Loss of Use. This part of your fire insurance coverage will compensate you for the cost of maintaining a comparable standard of living while your property is uninhabitable. After a major fire or flood, if the damage to your home means you cannot move back in, Additional Living Expenses coverage applies.

Some of the costs that are likely to be covered by the ALE section of your home insurance include:

  • Temporary accommodations (hotel stays, long-term rentals);
  • Food costs above your usual spending;
  • Travel costs (i.e., if you’re staying with family);
  • Moving expenses and storage costs, such as for salvaged personal contents.

However, coverage for Additional Living Expenses generally does not include costs such as lost wages, mortgage payments, utilities like hydro or your phone bill, or typical expenses. After a fire, you should call your utility providers, including cable, internet, and hydro, to inform them of the fire and ask if you can suspend service until your family moves back in.

The costs covered by the ALE section of your home fire insurance are only those above and beyond your normal household expenditures. For example, the average Canadian household spends about $200 per person every month on groceries, though this number may change depending on your region. For a family of four, that’s about $200 per week. The amount you spend over your usual expenditure is covered by Additional Living Expenses.

Unlike structural repairs or personal contents, you’re paying many of these expenses right away. You may have to pay for a hotel and a long-term rental, takeout for the whole family while you don’t have a kitchen, or more on gas because work and school are further away. The costs can add up quickly, while your insurance claim can take months.

If you can’t afford to wait to settle your insurance claim to cover the costs you’re paying now, you can ask your insurance company for an advance. The advance will be deducted from your final reimbursement, but an advance does not mean you have to accept their first offer. You can still negotiate better compensation after asking for an advance. It’s the insurance company’s responsibility to make sure you can enjoy a comparable standard of living while your home is being repaired or rebuilt.

Your house fire insurance coverage will not continue to pay Additional Living Expenses once your home is habitable again. Sometimes families choose not to move back in right away. For example, they may not want to disrupt their children’s routines during exams or deal with moving during an important work deadline. If that’s the case, you will have to assume those costs yourself.

A blue and white condo tower

Home Fire Insurance Coverage for Other Property Types

Home Fire Insurance Policies for Condos

What about home insurance fire coverage if you live in a condo? With nearly 2 million Canadians living in condos that they either own or rent, fire claims for this property type are on the rise.

What does homeowners insurance cover in a fire at a condo? Unlike house fire coverage for a standalone home, a condo fire does not have a Structure component. Repairs to the building itself should be covered by insurance taken out by the condo corporation or board. Their insurance, which you help pay for through condo fees, should cover both private units and common areas such as hallways, staircases, elevators, and shared amenities like pools and gyms. This does mean that owners will have less control over the process. Repairs for multi-unit buildings are more time-consuming and complex than for single-family homes.

Home insurance fire coverage for condo residents includes both Contents and Additional Living Expenses. Condo owners and renters are generally responsible for handling their own Contents and ALE coverage, though the board may recommend a policy.

How Are Businesses Covered?

Residential properties aren’t the only ones that can be affected by fires, flooding, or natural disasters. If your business owns the building, however, the process can be fairly similar. Your policy should help you rebuild the structure and replace what was lost.

In a commercial claim, there is some difference when it comes to claiming lost inventory, equipment, and contents. This usually depends on whether depreciation is calculated on these items, while accounting for your policy and subject to sales tax calculations.

There’s also business interruption insurance, which will help replace lost business income. If a fire prevents your business from operating, business interruption insurance can help you keep up with payroll costs and debt obligations until you get up and running again.

If your business does not own its premises, the process can be a bit more complicated, and you will have to coordinate with the landlord to get structural repairs moving.

What Happens If There Is a Fire on Your Farm?

When it comes to your farm and fire, you may be looking at a claim that combines both business equipment and personal property. A farming business is a deeply personal one, and for many small farmers, your business is closely intertwined with your family home.

Your fire insurance coverage should differ slightly from most residential and business policies. There are policies that allow you to combine coverage for both your family home and business equipment, such as policies that include livestock insurance.

A couple signs a home fire insurance policy behind a miniature home and stacks of coins

Dealing with an Insurance Adjuster

You may need help dealing with your insurance adjuster to make sure your family or business receives adequate compensation. Insurance companies hire claims adjusters to assess the damage to your home and lost personal contents. They will also review your additional living expenses claims.

In order to get the most out of your fire insurance coverage, find out what to do after a house fire when it comes to filing your claim. There are eight steps to take in the immediate aftermath:

  • File your claim in writing with a letter to your insurer.
  • Request your long-form insurance policy.
  • Take photos of the damage once you are able to safely enter the site, according to fire officials.
  • Secure possessions that have sentimental value and document them before removal.
  • Document possessions that are removed to be restored.
  • Request a cash advance for immediate costs, such as shelter.
  • Review your policy limits and start to budget your living expenses accordingly.
  • Keep track of all your expenses and keep them organized in a folder.

Once your claim has been initiated, the insurance adjuster will review the scope of the damage and estimate the cost of repairs. They may hire a contractor or engineer to review structural damages, and they will determine the value of your personal belongings, either according to their replacement cost or their depreciated actual cash value. They then pass their recommendations onto the insurance company, which will present you with their settlement offer.

If you are concerned that the adjuster has left out important repairs or undervalued other areas of your claim, you can push back and negotiate for more.

Fire Insurance Coverage Complications

Fire insurance claims are not simple, and in some cases, there may be further complications regarding your claim. When you’re dealing with a large fire claim or there are complicating factors, a fire property damage lawyer can help you navigate those complexities and answer your questions. Below are some of the complicating factors we’ve encountered with claims.

Can You Change Your Fire Insurance Policy During a Claim?

Adjusting your fire insurance policy while you have an open claim is not a simple process, and there are several questions that come up when homeowners try to do it.

1) What happens when your fire insurance coverage comes up for renewal while you’re still dealing with a claim?

Most of the time, it’s not an issue if you have an open claim when it’s time for your home insurance policy renewal, and the insurance company should agree to a renewal. However, there are rare cases when the insurer will not renew if the structure has not been completed by the renewal date.

It’s not common, but if it does happen, you will have to be proactive about finding a new carrier. It should not affect your ongoing claim, but you will want coverage going forward.

2) Can you change your fire insurance policy during a claim because you’re unhappy with how the claim is being handled?

It’s not uncommon for policyholders to become frustrated and disappointed with their insurance company once they actually have to make a claim. If you can tell the insurer is trying to cut costs at your expense by undervaluing your claim, or if they make the process more complicated and demanding than it needs to be, you may want to change carriers as soon as possible.

Changing your insurance provider with an open claim is very difficult. Most other providers will not want to provide insurance if you have not resolved your claim or completed the rebuilding process. That doesn’t mean you’re stuck with your current provider if you’re having problems, but it does mean that you may have to wait before you can find a new insurer.

3) Should you adjust your fire insurance coverage to reflect what’s changed?

Sometimes policyholders want to adjust their fire insurance policy during the rebuilding process. If they’ve experienced a total loss, they may ask what it is they are insuring until rebuilding begins.

You will still need some kind of coverage to protect your property throughout the rebuilding process, and making adjustments can be complicated. You may be able to save some money on premiums if you are still very early on in the process, but you will have to keep your policy up-to-date as the situation changes. It is always a good idea to review your insurance when it comes up for renewal to make sure that you’re covered.

Woman reviews her fire insurance coverage

What Happens If Third-Party Liability Is a Factor in Your Claim?

When liability insurance and fire insurance claims become intertwined, the claims process can be considerably more complicated. Liability becomes a factor when someone is at fault for the fire, either through their actions or through negligence. For example, if a fire is started by the careless disposal of smoking materials, the person who disposed of those materials could be held responsible for losses.

Should that fire affect your property, you could pursue that neighbour for damages, likely paid out from their liability insurance. However, that process can take years, and in the meantime, you still have to pay to repair your home.

Alternatively, you can file a claim to have your own fire insurance coverage pay for the damage. Your insurance company will settle with you and then take on the right to sue your neighbour in a process called subrogation. This means that you will have to pay the deductible on your insurance, but it should speed up the process considerably.

You may still be able to sue for damages not covered by your fire insurance policy, such as expenses you had to pay beyond your insurance policy limits.

What If Your Fire Insurance Coverage Is Denied?

Should part or all of your fire insurance coverage be denied, an insurance lawyer may be able to help. You will need to build a strong case to prove that your claim should be covered, including detailed evidence of your losses and a justification for having that decision reviewed.

At Virani Law, we help homeowners negotiate fair reimbursement from insurance companies. It’s our job to take the stress out of the process while adding monetary value to the offer you receive. Your financial recovery is an essential part of the rebuilding process. If you’ve recently experienced a fire, feel free to contact us for more information about our practice and your insurance claim.

Recover, resolve, and rebuild with the help of Virani Law. We can help you deal with your insurance company and take the stress out of your insurance claim. Give us a call anytime while you handle your home insurance claim.