Merry Christmas to me... with a house fire!

Well - what does everybody need 5 days before Christmas ? How about a fire !
We woke up @ 3:30 a.m. yesterday morning to the smoke alarm & lots of smoke. After we realized what was was going on & woke up, we quickly got the boys out of the house & safely to my parents house, who live next door.
Thankfully it was contained to the laundry room, we keep that door shut to the rest of the house, because that's where our new puppy sleeps !!!!
She's o.k.! Amazingly she came out unscathed.
We went around the house to back door that goes into that room & opened the door - I know, I know - big mistake. It was mostly smoke, but when we opened the door you could see an orange glow. Right where the dog should be in her bed. The fire department was there almost immediately. Which is something because we live in the country & only have volunteer firefighters for our area. One guy lives real close.
Turns out our electric water heater caught something on fire. A pile of clothes - I don't think so, some boots, something - I don't know. It was next to a wall with a bunch of hooks for coats. Those & the wall are all gone now. My boys lost their winter coats & boots, hats, gloves for the whole family....
Luckily we are all o.k. & really didn't lose anything real valuable money wise or personally.
Now - it's dealing with the whole house smelly something awful. All of our clothes will need to be laundered, whole house cleaned, like major cleaning. We've got insurance people & restoration people in & out.
Here's the deal... the 20 year old or something water heater is what caught on fire. Electric water heater, we may have had something up against it - don't really know. All the evidence is gone.
Can an electric water heater get that hot on the outside to start a fire ? Now I think this is going to be a bigger mess & ordeal than it should be. We just can't start cleaning & going on with our lives. And I still have Christmas things to do & where is Santa going to come to? I know we are very lucky to be alive & really do still have a house & family we can stay with, but it just sucks!
Here's some photos:

Electric water heater has connections inside it to the power line and between the thermostat and the heating elements. If one of those connections was loose it could have overheated and started burning up

GraniteGirl, sorry to hear about your fire, I know it's an inconvenience at the moment and dealing with INS Companies is a real pain sometimes, but the most important thing is you are here and able to celebrate Christmas with your family and friends. Glad everyone got out OK. It could have been a lot, lot worse.

I'm just glad your smoke detectors worked. I tell folks all the time, change those batteries and if it's 5 years old change it. You just never know.
Ya'll will be fine, on the whole scale of things in life.