Knowing the difference between dwelling fire insurance and regular homeowners insurance is important if you own multiple properties. It’s easy to confuse the two types of policies due to their similarities, but the differences are significant.
How Dwelling Fire Coverage Differs from Standard Plans
Typical homeowners insurance policies pay for damage to the owner’s primary home in the event of certain types of disasters. Fire protection is usually part of the coverage. Dwelling fire coverage applies to vacation homes and other properties you may own but don’t use as a regular living space. It covers properties such as cottages, cabins, and rental investments. It covers attached structures such as garages and decks as well.
When to Use Dwelling Fire Insurance
It’s essential to consider dwelling fire insurance when you own multiple properties but don’t need standard homeowners insurance for each location. Certain locations cost more to insure with basic plans than others, depending on the neighborhood’s crime rate and the condition of the home. Here are common reasons to choose dwelling fire insurance:
- Owner usage: Homes that are difficult to insure due to poor conditions can benefit from dwelling fire insurance as add-on coverage.
- Second homes: Owning a second home is common among high-income earners with families. Fire coverage is important regardless of how often it’s used, especially if your home is situated in a dry, woodsy location.
- Investment opportunities: A common use of dwelling fire insurance is for owners of rental properties to protect themselves against damage caused by renters.
- Vacant homes: Houses that are unoccupied for extended periods can attract vandals and be a fire hazard if not well maintained. These homes should be regularly inspected and covered with dwelling fire insurance.
Different Types of Fire Dwelling Coverage
- DP-1: Basic Form – Also called perils policy, this plan covers fire, lightning, and internal explosions. Settlements automatically have actual cash value (ACV).
- DP-2: Broad Form – This broader perils policy covers falling objects, burglary damage, broken glass, and electrical issues. Claim settlements are based on replacement cost value.
- DP-3: Special Form – This plan offers the maximum amount of coverage for various damage except exclusions. It covers war attacks, earthquakes, neglect, and intentional loss.
How Fire Dwelling Insurance Affects Renters
The terms of your dwelling insurance policy determine how losses to your property may affect its tenants. In some cases, accident damage caused by tenants may be covered by the tenant’s own renters insurance. Dwelling fire insurance may also cover damage caused intentionally by the tenant, especially if it caused other tenants to move, leading to revenue loss. Various losses to your property may be protected by dwelling fire coverage, so it’s crucial to discuss your belongings with an insurance professional.
Landlord insurance, by contrast, does not cover the personal items stored on your property. Renters insurance, however, does protect the personal items of renters. Insurance providers who offer dwelling fire insurance usually design their own policies instead of following an industry template. Some policies, for example, cover the owner’s personal equipment stored on a rental property, while others require add-ons.
You should never assume that a particular policy will cover all of your belongings. It’s best to create an inventory list of your valuable items and then share it with an insurance expert to determine your best coverage options, which might include dwelling fire insurance for your properties other than where you reside. Contact our experts at Sausman Insurance Agency to learn more about how to get the best coverage for your insurance needs.