Any options after house fire?

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Myopic squirrel
Posts: 196
Joined: Wed Apr 24, 2013 11:02 am

Any options after house fire?

Post by Myopic squirrel » Fri Sep 14, 2018 11:08 am

After one suffers a house fire, and has dwelling insurance, if the settlement is in excess of the mortgage, does a homeowner have the option to pay off the mortgage and just walk away? Thank you in advance!

Thesaints
Posts: 1619
Joined: Tue Jun 20, 2017 12:25 am

Re: Any options after house fire?

Post by Thesaints » Fri Sep 14, 2018 11:13 am

You mean not rebuilding ?
As lng as you pay off the mortgage, you can do whatever you want.

Rupert
Posts: 3740
Joined: Fri Aug 17, 2012 12:01 pm

Re: Any options after house fire?

Post by Rupert » Fri Sep 14, 2018 11:21 am

Are you asking if you are required to rebuild the house? You aren't required to do that, but your insurance settlement will likely be less than if you did rebuild. In other words, under most insurance policies, the insurance company is only required to pay you the full replacement cost of the house (the face value of the policy) if you rebuild. Read the terms of the policy carefully.

mouses
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Joined: Sat Oct 24, 2015 12:24 am

Re: Any options after house fire?

Post by mouses » Fri Sep 14, 2018 11:25 am

Rupert wrote:
Fri Sep 14, 2018 11:21 am
Are you asking if you are required to rebuild the house? You aren't required to do that, but your insurance settlement will likely be less than if you did rebuild. In other words, under most insurance policies, the insurance company is only required to pay you the full replacement cost of the house (the face value of the policy) if you rebuild. Read the terms of the policy carefully.
Wow, really? What about flood insurance? If my house gets wiped out in a hurricane, I am unlikely to rebuild. Or does rebuilding somewhere else count?

Rupert
Posts: 3740
Joined: Fri Aug 17, 2012 12:01 pm

Re: Any options after house fire?

Post by Rupert » Fri Sep 14, 2018 11:44 am

mouses wrote:
Fri Sep 14, 2018 11:25 am
Rupert wrote:
Fri Sep 14, 2018 11:21 am
Are you asking if you are required to rebuild the house? You aren't required to do that, but your insurance settlement will likely be less than if you did rebuild. In other words, under most insurance policies, the insurance company is only required to pay you the full replacement cost of the house (the face value of the policy) if you rebuild. Read the terms of the policy carefully.
Wow, really? What about flood insurance? If my house gets wiped out in a hurricane, I am unlikely to rebuild. Or does rebuilding somewhere else count?
To an extent the answers to your questions depend on state law -- on how courts have interpreted insurance contract terms in your state. The answers certainly depend on the terms of your specific policy. In general, though, if you choose not to rebuild at all (most policies would allow you rebuild on a different site) your replacement cost policy converts to an actual cash value policy, which typically means the insurance company owes you less money. Note also that flood insurance -- which is a federal program -- typically works differently from other insurance policies. The important takeaway: Read your policies and, if you don't understand the terms, ask your agent how the policy would pay out under various scenarios. (Edited to add: Some policies have what's called a "cash-out option," which explicitly allows you to just take the cash and walk away. If you have this coverage -- and I think it's somewhat unusual -- it will be a prominent feature of your policy. In other words, it will be very plainly stated that you have that option and how the payout will be calculated. Even when you have an explicit cash-out option, I'm not sure you get replacement value. Perhaps an insurance agent/broker will chime in with more info.).

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