Most homeowners (and renters) expect fire insurance to cover every flame that could engulf their homes, but what if yours doesn't? Unfortunately, there are many reasons why insurance companies deny fire claims. We have researched the topic in-depth to give perspective on the common reasons why insurance companies deny fire-related claims.
The top reasons insurance companies deny fire claims are:
- You make a mistake (or lie) on the paperwork
- Arson is suspected (by you or someone else)
- The home is missing permits and inspections
- You didn't pay your premiums
- The coverage is inadequate
- The home has lingering fire hazards
- You weren't living in the house when it caught fire
- The fire was a wildfire, and your insurer doesn't handle those
As you can see, the reasons behind insurance denials over fire claims need a bit of extra discussion. Read on for details on the common reasons your claim may not be covered, and what you can do if it's denied.
What Are Common Reasons for Fire Claims Insurance Denials?
Every insurance company—and agent—is different. For consumers, that means a long list of reasons why claims are denied and different explanations for them. Here are the common causes of denials.
1. A Claim Can Be Denied If You Aren't Clear On the Details
Like other insurance claims, fire claims involve replacing your belongings that were damaged or ruined. But if you lie about the things you lost in the fire, the insurance company might not pay.
There's no precise way to prove you're lying, but many insurance companies will require receipts that show your belongings were as valuable as you claim. If the evidence doesn't match up, or the company has any reason to think you would lie, then the claim won't go through.
2. If An Arsonist Is Suspected, Insurance May Not Pay
Before you can file your claim, the fire department, police department, and even investigators from the insurance company must sift through the evidence. If there's an apparent reason for the fire, like a faulty appliance or something else beyond your control, it's more likely your claim will be paid out.
However, if arson is suspected, the insurer will be hesitant to pay you for the claim. Especially if they think you might have something to do with it, the company can deny your claim.
Arson is a crime—even if it's your own home—and falsifying an insurance claim is, too.
That said, if someone else burns your house down and the investigation can prove it, you may still have a claim.
3. The House (Plus Any Improvements) Doesn't Match Property Records
Taking the DIY route when making repairs or upgrades to your home isn't always smart. But even if you're not the one who did the work (maybe the previous owner did), you could be on the hook for damages.
For example, if the former owner finished the basement of the house—including doing the electrical work themselves—and there's a fire, you may not have a valid claim. For homes lacking permits for any work completed, the insurance company can claim you didn't hold up your end of the contract.
Making sure your house has all its permits in order is crucial, whether you're purchasing, insuring, or selling. Otherwise, you could lose out, both on your insurance premiums and other aspects of ownership.
4. You Didn't Pay the Premiums (On time)
Insurers want their money, so if you don't pay your premiums, you won't have coverage. But even paying late can affect your policy, especially if the fire happens near the beginning or end of a renewal period.
The best way to avoid the denial of a claim is to keep your policy updated at all times.
5. The Coverage Amounts May Not Be Enough For Your Claim
Like paying your premiums on time, choosing the right coverage is also vital for a successful fire claim. For example, if your policy covers the home but not your belongings, you may be paying out of pocket to replace household items.
You need to recognize the differences between replacement cost and actual cash value when choosing insurance amounts and coverage.
Just like car or health insurance, your policy only covers the agreed-upon items in your contract. Therefore, you must read through the options and understand the coverage you select.
Also, it's worth noting that not all homeowner's insurance coverage will help replace your vehicle(s). Learn more about the coverage you need for your cars in our post, Collision Coverage vs. Comprehensive Coverage - What's the Difference?
6. The Home Has Unaddressed Fire Hazards
Even if you secure a fire insurance policy on your property, you'll need to read the fine print of your agreement with the insurer. An insurable property may become an uninsurable one over the course of a season or two.
The most common fire hazards are trees and undergrowth. This means many homeowners must trim trees, fire up the weedeater, and make sure their roof is clear of plant and other debris.
Still, each insurer's requirements vary, and obtaining insurance on a home with many trees or other fire hazards may be impossible. If your wildfire risk changes, whether due to current events or lack of maintenance at your property, the insurance company may refuse to enact your policy.
7. Your Property Was Vacant When It Caught Fire
Many insurers stipulate that they won't cover fires in vacant homes. If your house has been vacant for 30 or more days, the insurance company may decline to cover the fire.
After all, leaving your home unattended may be perceived as not fulfilling your end of the bargain when it comes to your policy terms.
8. The Damage Was Due to a Wildfire
In some cases, homeowner's insurance policies don't cover wildfires, specifically. Generally, you can expect a comprehensive homeowner's insurance policy to cover nearly everything.
Unfortunately, in areas that are highly susceptible to wildfires, insurers may pick and choose what they cover and how thoroughly.
What Can I Do If My Home Insurance Claim Is Refused?
Some insurers refuse homeowners' claims but later agree. So, there are a few steps you can take to reach a compromise in many cases.
Hire an Insurance Claim Attorney to Get a Claim Accepted
One option is to hire an insurance claim attorney to defend your interests. If you're having trouble communicating with the insurer or don't feel like you're getting fair results, an attorney may be able to help.
An attorney can gather paperwork and handle the things you may not have time for. And sometimes, the threat of litigation is enough to encourage insurers to work with homeowners on a solution.
Submit More Information to Support Your Claim
The Insurance Information Institute recommends not throwing anything away immediately after a fire. They also recommend contacting the insurance company as soon as possible, because time limits often apply.
Still, some insurers may want additional information from you after they assess the damages. You might receive a denial, along with a note that stipulates that further information is necessary.
You might be able to submit receipts, for example, to prove how much the destroyed items were worth. Always read the fine print to find out whether the decision is final or possibly negotiable.
How Are Homeowner's Insurance Claims Paid?
The good news is that your insurer has agreed to pay your claim. But what happens after you accept a settlement amount?
Homeowners Get Checks; Contractors Get Paid Directly
In most cases, homeowners will receive a check for their insurance claim. Sometimes, you'll receive multiple checks, depending on whether you're replacing belongings or not.
However, some insurance companies will require you to replace the damaged items and then send receipts for proof of purchase. Only then will you receive the reimbursement.
If your home requires repairs (or a complete rebuild), most insurers cut a check directly to the contractor. Sometimes they'll use an escrow account instead, which means you don't have direct access, but neither does the contractor until the work is completed.
Learn more about how homeowners' insurance claims are paid in our related post.
Can I Keep My Homeowner's Insurance Claim Check and Make the Repairs Myself?
Many insurers allow homeowners to complete their repairs. You may receive a lump sum to use as you wish, or you may need to submit proof of completion of the work.
The requirements vary based on your insurer and the terms of your policy. Your insurer will likely be very clear about what work homeowners can DIY and what requires a professional. Then, it's up to you to decide how to proceed with rebuilding your home and life.