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Fire insurance: A primer for Californians

Californians have only recently begun to piece their lives back together after last fall’s spate of wildfires spread property damage throughout the state. There are many serious tasks to deal with, such as finding a new place to live and recovering lost property. Another important step that wildfire victims will have to take care of is filing a fire insurance claim.

Fire insurance is a topic that is confusing for many policyholders. Is fire insurance included with homeowners’ insurance? Will it cover the damage caused by wildfires? Let’s take a look at some of the basic tenets of fire insurance.

Understanding fire insurance

Many homeowners insurance policies include a provision that addresses fire damage, but fire insurance can also be purchased as a standalone policy. These policies tend to be more comprehensive and far-reaching than provisions that are included in standard homeowners insurance.

What does fire insurance cover?

Generally, fire insurance covers property that is damaged, lost or destroyed in a fire. This can include your dwelling, other structures on the property like sheds and guest houses and personal belongings. Fire insurance can also cover what is called "loss of use": The expenses of finding temporary living arrangements, buying meals and even boarding pets.

When an insurance company assesses the value of your damages, it uses two methods. The first is called actual cash value, and it refers to the fair market value of your property. Because most home goods do not have a high market value, this means that an insurance company could end up paying the claimant much less than is actually needed to cover their damages. The second method, known as replacement value, is based on the full value of what it would cost to replace a piece of property. Under this method, policyholders would be reimbursed for the full value of their losses—or as close to it as possible.

Filing a fire insurance claim

Many wildfire survivors are probably planning to file fire insurance claims with their providers, if they haven't already. Even though insurance companies have a responsibility to fulfill the terms of their contracts, it is all too common for them to cut corners on their clients’ settlements. It may be necessary for some claimants to contact an insurance attorney. Insurance attorneys may be able to help victims of California wildfires file fire insurance claims and receive the settlements they need.

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