15 Tough Financial Lessons I Learned from Our House Fire

It was a cold January day, and somehow, without anyone around, a burner in a basement stove caught fire. 

Within moments the house was filled with smoke, and though the fire itself was put out fast, the entire house had to be rebuilt from the studs-up thanks to the significant smoke damage.

It was a life-changing event, and while we have excellent home insurance with ample coverage, there were several mistakes made along the way that made this a very expensive situation.

Here is what happened to us after the fire and how you can avoid foolish financial mistakes like the ones we made.

Luckily, we invested in a quality policy when we bought our home, and we had a good agent. The problem was that we had no idea what was actually in our policy or how that coverage applied in this situation.

It was a shock right away because we had no clue how to get help and had to rely on our agent for information and guidance. While this didn’t technically cost us anything financially, it could have if our policy wasn’t a higher-end, more robust policy to start with.

Another key concern comes from the rapid increase in home values in our area. At first, there was talk of tearing down and rebuilding the home because of how invasive the smoke damage was. However, doing so would have cost a lot more.

The problem was we didn’t raise our homeowner’s insurance value alongside the increase in the value of the home. When you’re home costs more to rebuild, you need more insurance to cover those added costs.

When you have a fire with four family members and five pets who need a home, you’re desperate to find a place to move quickly. That’s hard to do in a tight rental market and one problem we encountered was a fake rental ad online.

Naturally, we wanted to find somewhere to live during the rebuild, so we contacted an ad found online, paid a deposit for what seemed to be the perfect property, and then never heard back.

The scam was just to secure a deposit from desperate people, as the home wasn’t actually available for rent.

By the end of the day of the fire, we realized that we had no clothes that were easily accessible. That meant spending a small fortune at the store that night just to have clothing and basic needs for the next few days.

We knew our insurance company would eventually pay, but we didn’t know they would provide us with an advance until several days later. We could have saved a bunch of money if we did.

Here’s an important lesson you can apply today: Create a home inventory that includes visual and written documentation of what you own. 

A home inventory allows you to show the insurance company exactly what you had, so they will cover the cost of replacing it. It’s hard to remember what you had, especially if it’s been several months since the fire when the insurance company asks for a breakdown.

The good news is we had two full years to claim our losses.

Initially, we spoke to just our insurance agent, who was very helpful and supportive. However, when handed over to the claims adjuster, things went far more off the rails. He was less communicative and deceptive. He also wasn’t clear about what was actually happening.

We didn’t know that we had options, like talking to his supervisor to get straight answers to our questions. That went on for months, all the while our home sat untouched by contractors as he dragged his feet.

The day after the fire, a contractor showed up on site and began walking around, making statements about the work needing to be done, and providing insight into when his crew could get started.

He was aggressive but refused to provide an estimate on the work to be done until the house was fully cleaned out (a process that took three months). He certainly wanted us to sign a document agreeing to give him the job though.

We talked to our agent, who said if we were not happy with that contractor, we could certainly choose another. We chose a new contractor who was more upfront about costs and his timeline.

Even though they initially seemed amazing, we didn’t know the turmoil happening within the company. This was in 2021, during the aftermath of the pandemic. The company didn’t have enough qualified labor, and it showed.

The project was initially a six-month project “tops,” but it turned into a 13-month endeavor instead. Had we known the company was struggling, we may have considered alternatives.

It’s amazing just how expensive it can be to complete construction projects, but in many situations, we had no idea that the initial estimate wasn’t going to be enough.

While the insurance company was good with upping their funds to meet unexpected costs, we felt we didn’t always see the whole picture.

For example, our home’s main floor was thick, high-quality tile. Initially, they wanted to replace it with builder’s grade tile, which would certainly be less expensive to the insurance company but wouldn’t match what we had there previously and expected to get put back in.

During that time out of our home, many of our costs would be covered by the insurance company. They paid rent at the rental property, and they covered the cost of items we needed to buy. However, we didn’t realize how much they could cover.

Especially during the first week when we didn’t have access to our home’s belongings (many of them did make it), and we were forced to eat out most meals. It turned out they would have covered that if we had receipts.

Our home was in good condition before the fire, but there were certain areas we wanted to upgrade or change up. Initially, we thought we had to go with what was there, just replacing like-with-like. That’s not the case, though.

For example, we didn’t have to put the 1970s faux brick back up on the walls in the living room (which was a nice chunk of savings).

We also didn’t know we could slightly alter the floor plan of the home, removing a wall and opening up the space. That eventually saved us money and made the home a bit more navigable to us later.

Initially, the smoke damage was thought to be less invasive, and we just wanted to get back into our home. However, when you have a family member with a chronic health condition, you need to be thorough.

We pushed for further inspection of the walls to be sure there wasn’t mold growing in the basement (it really did take months to clean out the basement and dry it out).

We didn’t want just a “fix” but a healthy solution. Initially, we agreed not to have some of the drywall replaced but then were able to work with the contractor to have the entire project completed due to health risks.

This was a potential loss for us but a reality check. Our home wasn’t safe to live in, so it stood vacant while the team worked to repair it. The general contractor had some teams who left equipment in the house over the weekend, which turned up missing.

They tried to blame us for the loss, but it was later determined they didn’t lock the property as they were supposed to.

The bottom line is that we could have been liable for accidents to contractors (if they weren’t licensed with proper insurance) and their belongings. With no electricity in the home, we couldn’t even put up cameras.

For some strange reason, some of the oddest things were not covered by the policy. For example, our home has two bedrooms on either side of a bathroom.

That bathroom was gutted, but the insurance company decided there was no need to gut the bedrooms, which had shared walls with the bathroom and were equal distance from the fire.

We didn’t know we could fight back on this, but ultimately, they refused to gut those two rooms. We worked with our contractors to ensure they were properly cleaned and sealed to ensure no risks occurred.

Months into the process, with a non-responsive insurance adjuster, no information to update the rental company, and lots of work not even started, we didn’t know we had any other options. We felt like victims of the insurance company. All we could do was wait.

We didn’t know we could turn to an attorney to put some pressure on the insurance company. Once we did, and they made an initial call to the supervisor, things began to change.

Suddenly we had a new adjuster who was more than communicative, and money was rolling over to the contractor to get the work done.

You don’t plan for a fire, and you never think it will happen to you. Some people even believe that victims end up with more money and compensation from their insurance companies than they need.

That’s not the case, and, in many situations, the entire process is exhausting, terrifying, and never-ending.

Be your own advocate now, get the insurance you need, review and understand your policy, and then stay on top of your agents and adjusters should this occur. This will help you get ahead financially and make sure you get the full benefits of your policy.