April 4, 2012

How Common Are House Fires?

A relative of mine currently has no home insurance.   If his home burns down then he's just out of luck.   He's taking a risk by not paying insurance.   Since he doesn't have a mortgage loan he can get away with not having insurance, plus he is in a very good financial situation so he could withstand a major loss.   While this is risky for him, going without insurance is saving him over $1000 a year.   For most people insurance is required for your mortgage so its not an option.   Even if your mortgage is paid off its usually not a good idea to go without insurance since the risk of a major loss would be a major financial hardship.

The major risk my relative faces is a house fire.  How common are home fires really?

[edit: I should point out that home owners insurance covers a variety of things other than fires.  Having homeowners insurance is almost always a smart move.  So don't follow my dads example ]

Image by dvs
I do not personally know a single person that has had their home burned down entirely.   I do know a couple people who have had minor home fires.  One person was smoking and had a small fire in his room and another relative had a kitchen fire.  In both cases the damage wasn't very significant.   But of course my own anecdotal evidences from my personal experience doesn't tell us much. 

The FEMA U.S. Fire Administration keeps stats on fires

In 2010 there were 362,100 residential fires in the USA.     In total the fires caused $6.65 billion in damages.

According to the Census there are 131 million housing units in the US and 114 million households.

As far as frequency you could figure that 0.317% of households experienced a fire in 2010.   Or we could say that 0.276% of housing units had a fire in the year.

With 362,100 fires and $6.65 billion in damages that means the average property damage from a fire was $18,365.

Clearly damages of $18,365 would not indicate the average fire causes the home to be destroyed or "burned to the ground".    Most of the fires are more more minor in nature and likely include many kitchen fires which result in smoke damage and minor structural damage.    Of course $18k is a large bill and most people can't afford that, but its much better than having to replace an entire home.

I could guesstimate the portion of homes that are actually burned to the ground.  First I'll take a wild guess that replacing a home costs $150,000 on average.  With $6.65 billion in damages and assuming that $150,000 replacement cost then the maximum number of homes that could be burned down totally would be about 44,333.   This is just a guess of course.   But I think it is reasonable to assume that only 10-20% of the homes that have a fire are totally ruined to the point of needing complete rebuilding.     If one in 10 fires results in a destroyed home then 0.03% of individual homes are destroyed by fire in a year.  That would mean that the chances of having a home burned down would be approximately 1 in 3000 ballpark.

Another way to look at the cost of fires is the average cost from fires per year per household.   Since theres $6.65 billion in damages if you average the cost over all the 114 million households the average cost per household is just $58.33.   If you're deciding if insurance is worth while then this is the figure I'd use compared to an average cost home.  If the average home costs about $170,000 then we're talking roughly 34¢ per $1000.   In other words a $200,000 home would have likely fire damage of 34 x 200 = $68.   I would estimate the fire insurance costs at roughly 34¢ per $1000 home value.    Keep in mind this is really just a ballpark estimate.  Insurance costs vary greatly from state to state based on local costs and varying likelihood of damages.

Of course the risks will vary based on several factors like age of the house, whether or not you smoke, how much you cook in the kitchen, etc.   The amount of property damage caused by a fire will be proportional to the value of the house as well.   It costs a lot more to replace a fancy kitchen in a  large house then to fix a few cabinets in a squalid apartment.  

What causes home fires?

FEMA's US Fire Administration site also has data on the causes of fires.   Here are the causes of residential fires ranked by %.

Cooking 46%
Heating  13%
Electrical Malfunction 7%
Other Unintentional, Careless 7%
Open Flame  5%
Intentional 4%
Equipment Malfunction 4%
Other Heat 4%
Appliances  2%
Smoking 2%
Exposure 2%
Natural 2%
Other Equipment 1%
Investigation with Arson Module 1%
Playing with Heat Source 1%

Looking through that list, there are not a lot of causes that you can easily avoid.  Not smoking and not intentionally burning down your own home only accounts for about 6% of the fires.

Cooking is by far the #1 cause of fires in the home.   That makes sense.   Who doesn't know of someone who's had a kitchen fire and probably had something on their stove catch flame once or twice?   Ok maybe I'm not a very good cook, but I think fires in the kitchen are not very uncommon and they can certainly turn into major fires.

Notice that smoking is the cause for just 2% of fires.   I would have guessed that number would be higher but only around 20-25% of adults smoke in the US.


  1. Home insurance covers other risks besides just fire. For instance, liability. The irony is that if you have enough assets to handle a fire loss, then you are more to lose if you get sued by someone injured on your property.

    The stats are very interesting. I am reminding everyone I know to put a fire extinguisher in their kitchen!

  2. SteveD, Thanks yes, thats a good point which I failed to cover. I'll make a note to explain there are other risks that I'm not discussing. I believe my dad has liability insurance through another source. He has several rentals and I know he has liability coverage because of them. However he would not be covered for damage to his home from theft, burst water pipes, vandalism, or any of the other various things homeowners insurance covers.


  3. Your probability of a fire of 1 in 3000 is calculated per year. Most people own their home for longer so you would need to add up that probability over the number of years the house is owned, which makes the probability much higher. Good article!

    1. you pay insurance every year for the likelihood of the house burning down that year, so the figure being cited is the relevant one

  4. As it stand right now, you have almost a zero chance of your house being completely destroyed. When you look at saving $1000 a year of home owners insurance; you have to look at all the other money you save from not purchasing insurance on other assets such as washers, dryers etc. Then look at the probability of all does items needing serious repair or replacement. We are more adverse to loss and that is why we feel we must purchase insurance.

  5. Take 30,000 dollars of lost opportunity cost @ 5% to understand what you really paid for the insurance.

    1. If you start with a $1000 premium that increases by 2% each year (inflation estimate), and sum it over 30 years you would have spent $40,568 on insurance and had $87,870 in opportunity cost (assuming 5% growth of investment).

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  7. Well, when it comes time for monthly exorbitant insurance payments, your relative is in luck because he won't have to pay one cent. He can set that money aside and use it for something productive, like buying another house if his is ruined. If his house is never destroyed, then he gets to keep his money. It's a win win.

    1. Hmmm not really. That may sound good if his house is destroyed at year 30 but not at year 2. Even at year 30 (if you take the 30 year opportunity cost calculated above) he still needs to find an additional 200k to rebuild. You're not going to get much of a house for less than 300k.


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