Know Your Policy: What Your Homeowners Insurance Policy Covers for Fire Damage.

Although most homeowner’s insurance policies cover fire damage, it’s not the whole story.

Every homeowner’s insurance policy is different, but most policies cover property that was destroyed by fire, or damaged by fire, soot or ash—for both your home, and all the property inside of it. A typical homeowner’s policy also covers the cost of your lost belongings and in some cases even landscaping costs. However, in some areas that are particularly prone to wildfires, residents may be required to purchase additional coverage for fire protection.

It is also important to remember that your policy may contain limitations on certain types of claims. For example, you may not be able to recover the full and total value of every item that was damaged or destroyed. It all depends on the specific—and often confusing—language of your policy.

Risk of Being Underinsured. Another concern is for those residents who have insurance, but are underinsured. The California Insurance Commissioner stated recently, in the wake of the disastrous wildfires, that as many as a quarter of the California homes destroyed may have been underinsured. Part of the issue with being underinsured is the rate at which your policy covers rebuilding. According to the Insurance Information Network of California, the average cost to rebuild a home in California is somewhere between $100 and $300 square foot. But industry experts say that this “average” is way too low, and in fact many of the newer, more custom homes that were destroyed in these fires is more in the range of $500 per square foot. And if that increased value was not figured in the original insurance policy, then the homeowner’s insurance may not cover those costs of rebuilding.

There are certain categories of insurance coverage that you should be aware of, as you return home and consider what will be covered by your homeowner’s insurance policy. These categories include:

Additional Living Expenses. If your property is not safe to live in, you should check if your policy covers “Additional Living Expenses.” If it does, it means that it covers relocation-related expenses, such as temporary shelter, clothing and food. You may find this type of coverage under the Loss of Use section under your homeowner’s insurance policy.

This means that your insurance company will reimburse you for your living expenses—and that does not necessarily mean the local shelter. It will cover reasonable and comparable quality of life, which typically will equate to an extended living hotel or a comparable rental property. You can also replace your clothing, equipment and household goods. It may also cover extra transportation costs due to your relocation to school or work, furniture rentals for your temporary residence, pet boarding, moving costs, telephone or utility installation costs in your temporary residence, and other out-of-pocket expenses you have while you are unable to return home.

But it’s incredibly important that you keep all of your receipts. Your insurance company will not reimburse you for expenses that you cannot prove. For all of these expenses, document your costs and keep copies of all of your receipts.

Personal Property. Your insurance policy will also cover your personal property loss. This includes all of the items inside your house, such as your furniture, clothing, electronics, and appliances. To ensure that you receive full compensation for the goods that were destroyed, you should take extra care in documenting the personal property that was lost.

Your Dwelling. Your policy will also cover structural damage to your home and your real property. You should identify damage to your all the buildings on your property, including your home—such as your tool shed, pool and garage—by making a list of everything that is visible to the eye. This can include everything from cracks in the walls, damage to the floor, damage to the ceiling, missing roof tiles, and broken stairs and porches. In many cases, structural damage to your home may not be immediately visible. In these cases, your adjuster should suggest that you hire an expert engineer who is licensed to inspect the property. For all repair work, obtain multiple bids from reliable and licensed contractors for all of the repair work your home requires. These bids should be detailed, and include specifics such as the materials the contractor plans to use and a detailed, line-by-line listing of the prices for materials and labor costs.

Water Damage. In most circumstances, homeowner’s insurance policies do not cover flood damage. However, many policies cover other types of water damage. For example, many homeowner’s insurance policies cover damage caused by rain coming in through the roof where a tree crashed, when the tree fell because of high winds. If you’re uncertain about whether something is covered, consult your policy and your insurance agent.

Proof of Loss. As part of the claims process, your insurance company will likely send you a claim form that’s known as a “Proof of Loss” form. This is an official statement that you make, as the policy holder, to your insurance company about the losses you’ve incurred. The purpose of this document is to put your insurance company on notice to the potential extent of its liability. Related to this form, an insurance adjuster may visit your home to determine the extent of the damage.

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