But if your house is at higher risk of fire damage, such as a wildfire-prone area or if your home is older and at risk of electrical fires, your insurance policy may exclude fire coverage from your policy. To fill in this coverage gap, you may need to purchase fire insurance to adequately protect your home from fire and smoke damage.
Does homeowners insurance cover fire and smoke damage?
Fire insurance is included in every type of homeowners insurance coverage. This means whether you purchase the most basic policy type, like an HO-2, or a more comprehensive policy, like an HO-5, your home and belongings are covered from fire damage as long as it wasn’t started intentionally. If a flood or earthquake causes your house to catch fire, that would be covered as well, even though flooding and earth movement are technically excluded from coverage.
Here’s the different ways your homeowners insurance protects you financially if your home is damaged by a fire:
Dwelling coverage: If your home is damaged or destroyed in a fire, this covers the cost to repair or rebuild it, as well as debris removal costs. Your insurer will reimburse you up to the dwelling coverage limits in your policy, so make sure you have enough to cover the home’s full replacement cost.
Other structures coverage: This covers separate structures on your property, such as a detached garage or shed, if they’re damaged by fire. This coverage typically pays out up to 10% of your dwelling coverage limit.
Personal property coverage: This covers your belongings, such as furniture, electronic equipment, and clothing, if they’re damaged by fire or smoke. A standard policy covers your belongings on an actual cash value basis at up to 50% of your policy’s dwelling coverage limit, but you can often increase your limits or purchase more robust coverage for an additional cost.
Loss of use coverage: Covers the cost of temporary housing and other additional living expenses if you need to live elsewhere while your home is being repaired after a fire. Loss of use coverage is typically 20% of your home’s dwelling coverage limit.
If your house is damaged in a fire, you’ll need to file a claim to get reimbursed for repair or rebuild costs. If your claim is approved, your insurer will reimburse you for the fire damage up to your policy’s coverage limits, minus your deductible.
Learn more >> Does homeowners insurance cover wildfire damage?
What is fire insurance & when do you need it?
While fire insurance is technically part of every standard home insurance policy, many insurers won’t cover fire or smoke damage in fire-prone areas with the risk of loss is higher, such as wildfire-prone areas of California and Washington. In this case, you may need to purchase a separate fire insurance policy.
Fire-related claims are undoubtedly the single most expensive type of homeowners insurance claim, with payouts averaging $78,838 from 2015 to 2019, according to the Insurance Information Institute.  With the increase in wildfires, fire claims are only getting more frequent and expensive.
Similar to how we’ve seen insurance companies exclude wind and hurricane damage from policies in high-risk coastal communities, insurers are either excluding wildfire damage from coverage or no longer insuring homes in high-risk areas altogether.
Policy cancellations and nonrenewals are becoming increasingly common in California, Oregon, and other states with a high number of residential properties in the wildland-urban interface. In these areas, finding a standard home insurance policy has unfortunately become the exception, not the norm.
Learn more >> House fire statistics for 2022
What is covered in a fire insurance policy?
A fire insurance policy typically covers the structure of your home, other structures on your property (like a detached garage or shed), and your personal belongings in the event of fire damage. This includes fires caused by candles, grease, a short circuit or power surge in your electrical system, wildfires, and lightning.
How much does fire insurance cost?
A traditional home insurance policy that includes fire insurance coverage costs an average of $1,754 per year or $146 per month, according to our analysis of 2022 home insurance rates from across the country. But if you live in an area at high risk for fire due to wildfires or your community's ISO fire rating, you can expect to pay much more than that.
California, for example, saw an 11% increase in home insurance costs from May 2022 to May 2023, according to our home insurance rate increase analysis. Because costly wildfires are becoming more common in California, some insurers are not renewing home insurance policies in affected areas.
“There’s inflation that’s taken place, so the cost to rebuild a home costs quite a bit more than it used to,” says Janet Ruiz, Director of Strategic Communications at the Insurance Information Institute. “There’s also a shortage of contractors. And we’re seeing hotter, drier weather — and more wind — which leads to more wildfires. So all these things are coming into play at the same time.”
What is a difference in conditions policy?
A difference in conditions (DIC) policy fills in protection gaps and covers perils not covered by your fire insurance policy or FAIR Plan, including:
Medical payments coverage
Weight of ice or snow
It’s common for homeowners in California to get wildfire insurance coverage through the California FAIR Plan and combine it with a difference in conditions policy through a private insurer. Difference in conditions policies are sold by several popular insurance companies, including AIG, Stillwater, Travelers, and Safeco.
Learn more >> The best home insurance companies in California