Most homeowners insurance policies cover fire and smoke damage, but there are cases where insurers may limit or exclude coverage, particularly if your property is considered high-risk. For NCJAR members and their clients, staying informed about fire insurance is essential, especially in light of increasing wildfire risks. Here’s a detailed guide to help you navigate fire insurance policies and ensure adequate coverage.
Does My Homeowners Insurance Cover Wildfire Damage?
Standard homeowners insurance typically covers:
- The structure of your home
- Other structures on your property (e.g., detached garage, shed)
- Personal belongings
This coverage extends to fires caused by:
- Candles
- Grease or cooking accidents
- Electrical malfunctions
- Wildfires
- Lightning
However, not all fire damage may be included. Exclusions can include:
- Nuclear hazards
- Arson
- Damage due to poor maintenance or regular wear and tear
It’s critical to review your policy and consult your insurance agent with any questions about your specific coverage.
What If My Policy Doesn’t Cover Fire Damage?
In high-risk areas, some private insurance companies may exclude fire damage from their policies. If this is the case, here are your options:
Shop Around
Different insurers have varying risk tolerances. Some “non-admitted” insurers (not licensed by the state but legally permitted to operate) offer specialized coverage, such as “difference in conditions” policies that address coverage gaps. These policies are regulated differently and don’t participate in state insurance guaranty funds, so read the fine print and ask detailed questions.
Work with a Surplus Lines Broker
These brokers specialize in risks that traditional insurers won’t cover. Your current insurance agent or state insurance department can help you connect with a surplus lines broker.
What If My Home Is Deemed Ineligible for Fire Coverage?
If your insurer determines your home is too high-risk, consider the following steps:
- Contact an Insurance Professional: Discuss your options and compare quotes from multiple insurers.
- Explore Surplus Lines Options: Surplus lines brokers often provide solutions for high-risk properties.
- Obtain a Wildfire-Prepared Certification: Certifications from organizations like the Institute for Building & Home Safety can demonstrate reduced wildfire risk.
- Reach Out to Your State Insurance Commissioner: They regulate insurance companies in your state and may offer additional resources.
What Is a FAIR Plan?
For homeowners who can’t find insurance coverage on the private market, a Fair Access to Insurance Requirements (FAIR) plan may be an option. These state-backed policies:
- Protect high-risk homes
- Are generally more expensive than private insurance
- Offer limited protections
While not ideal, FAIR plans can serve as a safety net for those who cannot secure other coverage.
Key Takeaways for REALTORS®
As a REALTOR®, you can play a critical role in guiding clients through fire insurance concerns. Ensure they:
- Understand their current policy coverage
- Know how to find specialized insurance if needed
- Are aware of options like FAIR plans
Wildfire risks vary depending on location, but understanding fire insurance is essential for all homeowners. Encourage clients to consult their insurance agent and seek additional resources, such as those available at facts.realtor, for the most accurate and up-to-date information.
