The “Fire-Only” Policy: The Risky, Last-Resort Insurance for Uninsurable Homes.
My New House Was Too Old to Qualify for a Real Policy.
I bought a beautiful, 120-year-old fixer-upper. I was shocked when every standard insurance company denied my application for a homeowners policy because the wiring was old and the roof was in bad shape. I was in a panic. My only option was a “Fire Insurance” policy, also known as a DP-1. It was a bare-bones, last-resort policy that gave me the basic fire protection I needed to satisfy my mortgage company while I worked on renovating the house to make it insurable.
Why Your Mortgage Company Will Hate Your Fire-Only Policy.
It’s a Bare Minimum That Barely Protects Their Investment.
A mortgage company requires you to have homeowners insurance to protect their investment in your property. A simple fire policy is the absolute bare minimum they will accept, and they don’t like it. It doesn’t cover them for a host of other risks, like liability lawsuits or major water damage. They will often “force-place” a more expensive policy on you if you try to use a fire-only policy for too long. It is a temporary, emergency solution, not a long-term plan.
Comprehensive (HO-3/HO-5) vs. Fire-Only: One Covers a Fire, The Other Covers Fire, Theft, Liability, Vandalism…
A Single Peril vs. a Universe of Risks.
A Fire-Only policy (DP-1) is a “named peril” policy that typically covers only three things: fire, lightning, and internal explosion. That’s it. A Comprehensive Homeowners policy (like an HO-3) is an “open peril” policy that covers your house for everything except a few specific exclusions. It covers fire, theft, wind, hail, burst pipes, vandalism, and, most importantly, provides the personal liability coverage that protects you from lawsuits. The difference in protection is a vast, empty chasm.
If Your House is Old, in Disrepair, or Vacant, a Fire Policy Might Be Your Only Choice.
The Insurance of Last Resort.
Standard insurance companies are in the business of insuring good, well-maintained risks. They will not be willing to offer a comprehensive HO-3 policy on a house that is in poor condition, has an old roof, or is going to be vacant for an extended period. These properties are a much higher risk. In these situations, a basic, “fire-only” policy from a specialized, “non-standard” carrier might be the only insurance you can get. It’s not great, but it’s better than nothing.
Don’t Mistake a Basic Fire Policy for a Real Homeowners Policy. The Gaps are Massive.
The Most Dangerous Assumption a Homeowner Can Make.
Thinking that a “Fire Insurance” policy is the same as a “Homeowners Insurance” policy is a catastrophic mistake. You are leaving yourself completely exposed to the most common and costly types of claims. A burst pipe, a slip-and-fall lawsuit, a tree falling on your roof, a burglary—a fire policy covers none of these things. It is a dangerously limited product that should only ever be used as a temporary, last-resort measure.
“A Pipe Burst and Flooded My House.” My Fire Policy Paid $0.
A Real-World Example of the Coverage Gap.
My friend was trying to save money on a rental property and bought a cheap DP-1 fire policy. A pipe burst in the upstairs bathroom, and the water damage destroyed the ceilings and floors on the first level. The total repair bill was over $25,000. The fire policy paid absolutely nothing. Why? Because “accidental discharge of water” is not a covered peril on a basic fire policy. That one decision to buy a cheap, limited policy ended up costing him a fortune.
The Huge Liability Risk You Take By Only Having a Fire Policy.
You’re Saving on the Premium by Gambling with Your Entire Net Worth.
The single biggest risk you take with a fire-only policy is the complete lack of personal liability coverage. If your mailman slips on your icy steps, if your dog bites a neighbor, or if a guest is injured in your home, you have zero protection. A lawsuit for a serious injury can easily reach hundreds of thousands of dollars, putting your entire life savings, your home, and your future earnings at risk. A fire policy leaves you completely naked in the face of this massive risk.
Why a standard HO-3 is the “Swiss Army Knife” and a Fire Policy is just the blade.
A Multi-Tool vs. a Single-Purpose Implement.
A standard HO-3 homeowners policy is a financial Swiss Army Knife. It has a tool for everything: a blade for property damage (fire, wind), a can opener for liability, a screwdriver for medical payments, and more. A fire policy is just the blade. It’s good for one thing, but it’s completely useless for all the other problems you are likely to face as a homeowner. Don’t bring just a blade to the complex job of protecting your family’s financial life.
When does it make sense to buy such a limited policy?
A Temporary Bridge, Not a Permanent Home.
A fire policy should only ever be considered a temporary, emergency bridge. It can be the right tool if you have just purchased an old, uninsurable home and need coverage to satisfy the bank while you renovate it. It can also be a last-resort option for a home that will be vacant for a long period. But it should never be considered a permanent insurance solution. Your goal should always be to get the property into a condition where it can qualify for a real, comprehensive homeowners policy.
The Bare-Bones Coverage vs. The All-Encompassing Protection.
You Get What You Pay For.
The choice between a fire policy and a comprehensive homeowners policy is a stark one. One offers the absolute, bare-bones minimum of property protection and leaves you completely exposed to the most common and costly risks. The other provides a broad, all-encompassing blanket of protection for your property, your belongings, and your personal liability. The premium for a fire policy is cheaper for a reason: the coverage is a ghost of what a real policy provides.