You Need to Know What Your Fire Insurance Covers

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When there is a fire in your home, the damage can make the property un-livable, 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 and 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.

Does Homeowners Insurance Cover Fire?

Your home insurance policy protects you from various perils that can damage your home or result in financial loss. Some of these perils are nearly universally covered, such as fire. Insurance policies may also cover loss caused by:

  • Weather such as wind and hail;
  • Theft and vandalism;
  • Personal liability;
  • Water damage;
  • Flooding;
  • 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 Fire Insurance Cover?

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 coverage, but tenants typically don’t. Instead, renters’ insurance covers personal contents, liability, and additional living expenses resulting from displacement.

The costs covered by this part of your home insurance likely 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.

Other expenses, such as personal contents and additional living expenses, are covered by different sections of your home insurance.

However, costs such as property taxes and mortgage payments are not covered by insurance. 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, including 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 you may want help pushing back when you feel important costs have been excluded. It is possible to negotiate with the adjuster if you feel like you have not been given a reasonable offer.

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#2 Personal Contents

This area of insurance 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 jewelry collection.

You will need to draw up a list of personal contents lost due to a fire. 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 Proof 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.

How much you receive from personal contents insurance may depend on whether you have replacement value or actual cash value insurance. Most homeowners have guaranteed replacement cost, but the clause still has significant limitations. 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 trying to obtain a global cash settlement.

#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 unlivable. 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. In order to cut costs 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, new clothes, and more. 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 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.

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Home 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 and condo living becoming increasingly popular, fire claims are on the rise.

What does homeowners insurance cover in a fire at a condo? Unlike house fire coverage for a standalone home, in a condo fire there is no Structure element. 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 a single-family home.

Home insurance fire coverage for condos 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 that depends on whether or not depreciation is calculated on them according to your policy and how sales taxes are calculated.

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.

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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, lost personal contents, and 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 8 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’re concerned that the adjuster has left out important repairs or undervalued other areas of your claim, you can push back and ask for more.

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.