Each year, many homes are destroyed in fires. These fires start from a multitude of reasons: some are accidental (smoking in bed), and some are from fireplaces, space heaters or faulty electrical issues in the home. Each fire is investigated to locate the "hot spot," which is where the fire began. Insurance companies always get a report from the fire department, and have their own investigators come out and survey the damage to determine how much damage was done and the cause of the fire. They need to know all of this in order to begin the process of paying your claim. However, not all claims get paid for several reasons.
Your insurance claim can be denied if there is any evidence that a fire was caused by illegal activity, such as drug manufacturing. Insurance policies have many exceptions and loopholes, but this one is obvious. If you are a landlord and own rental property, an inspection of your property from time to time may give you hints as to your tenant's activities. Prohibit these activities in print in your lease agreement and file an eviction notice if you find illegal activities going on.
If a fire is deemed to be caused by electrical issues in a home where the electrical work was not permitted by the county in which the home is located, the insurance company can deny a claim. For example, if you bought a home with a finished basement, but later found out the previous owner did the work himself, and did not get permits or inspections, this may be a reason for denying a claim if it can be proven that the fire was started as a result of faulty basement wiring.
Insurance claims for a house fire can be denied by the insurance company if they determine that your claim contains fraudulent information or the list of burned contents seems excessive. (For example: You state you owned six television sets, and the inspector finds evidence of four.) You may have to prove the contents you state that were in the home at the time of the fire. The best way to do this is to videotape the home and its contents, noting key spots where art or other valuables are kept. These items should match the additional riders added to your insurance policy for extra coverage. Standard content insurance will be for a round number for replacement of all items, but special art should be appraised and added separately. Keep the video in a safety deposit box.
Not enough coverage is not a denial of a claim, but it is not enough funds to rebuild a home as it was. Check your policy from year to year to be sure your policy gives you enough money for the replacement cost of the home. This is all about contractor and material costs, and has nothing to do with appraised values of homes. Your appraised value may be lower, but the cost to build always goes up.