What Is Fire Insurance?

Fire insurance is property insurance that covers damage and losses caused by fire. The purchase of fire insurance in addition to homeowners or property insurance helps to cover the cost of replacement, repair, or reconstruction of property, above the limit set by the property insurance policy. Fire insurance policies typically contain general exclusions, such as war, nuclear risks, and similar perils.

KEY TAKE A WAYS

Fire insurance is property insurance that provides coverage for loss or damage to a structure damaged or destroyed in a fire.

Homeowner’s insurance usually covers fire damage but it may be capped at a rate that is less than the cost of the losses accrued, necessitating a separate fire insurance policy.

The policy pays the policyholder back on either a replacement-cost basis or an actual cash value (ACV) basis for damages.