What Is a Standard Fire Insurance Policy?

Standard fire insurance policies provide coverage against financial loss or property damage caused by a fire or other covered perils. The basic version of a fire insurance policy covers the cost of replacement, reconstruction or repair beyond what is outlined in the holder’s property insurance or homeowner’s policy.

Standard fire insurance policies provide coverage against damage to the dwelling itself. The policy either reimburses the holder on a replacement cost basis in the event the dwelling is destroyed or an actual cash value basis. Replacement coverage is determined by the issuer based on replacement cost estimators, the most recent property appraisal figure and the property’s square footage compared to its purchase price.

Basic policies protect against a number of perils outside of fire that cause damage, including lightning and hail. Specialized packages also extend coverage to surrounding structures and additional expenses associated with displacement from the dwelling.

Standard fire insurance policies are typically acquired for rental and investment properties that do not require protection against the owner’s personal possessions.

Procuring a fire insurance policy is also recommended if the individual’s property or homeowner’s insurance does not protect against fire damage. Extended protections beyond those outlined in the underlying property or homeowner’s insurance is recommended if the underlying property contains an assortment of valuable items.