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Wildfire Insurance for Homeowners

In most policies, wildfires are consider one of many forms of fire damage, but that is not always the case, and it is up to the homeowner to make sure that their home is adequately protected by their insurance policy. In locations where wildfires are common, such as parts of California, Texas, and Florida, to name only a few, wildfires may be specifically excluded from the standard coverage, in which case an insurance rider or even a special policy may be necessary.

Fire damage is part of a standard home insurance package, but there is nothing to require insurance companies to treat a wildfire the same as, for example, a kitchen fire. Among the possible reasons for exclusions are fires caused by arson, fires caused by lightning, and fires caused by other natural events, such as earthquakes or volcanoes. If your policy contains such exclusions, you will need to pick up special coverage, called a rider, to fill in the missing gaps.

Unlike earthquakes and floods, wildfire damages should not require a completely separate policy and probably do not even mean resorting to a high risk policy. The rider will cost a little more, but the cost, even if high risk insurance is your only option, will be much lower than if you had to pay for the loss of home and property out of pocket.

Another possibility that homeowners should be aware of is that your policy could limit the amount the insurance company pays by providing coverage as actual cash value rather than full replacement cost. In this situation, actual cash value means that the insurance company pays the original cost of the item, minus depreciation over the length of time the item or material has been in use. A better form of coverage, but one that will increase your premiums slightly is to have full replacement cost coverage, which will pay for the repairs or replacement using the actual brand or materials, regardless of the cost difference between the original purchase or construction and the current market values.