First house fire, any advice or wish I had known?

Question

Had my first fire, looks like it will likely be a total loss. Just curious of any advice from those who have been through it. Also any thoughts on rebuild vs sale of the lot. Thank you so much!

John Mocker · Answer

Brett,

If your Insurance policy is based on Replacement Cost (RC), they will not normally pay that amount for the building until you have rebuilt.  The normal situation is you will be paid first the Actual Cash Value (ACV) which is defined as the Replacement Cost less the depreciation.  Then, when you rebuild, they will pay the additional amount to get to the RC.

Chris Seveney · Answer

@Brett Hennessy

Very different if a mortgage and no mortgage on the property as well, but typically depending on location we have taken $ and sold lot and in decent areas we would rebuild. It’s really a case by case basis but make sure to stay in communication with your insurance provider as well as your lender as there are notification requirements you have to provide to them

John Mocker · Answer

Brett,

The 80% Coinsurance you are referring to means that the limit on the policy must be 80% of the actual Replacement Cost for the loss to be fully covered.  For example, if the actual RC on the building is $100,000 then the limit on your policy would need to be $80,000+.  If you insure to less than 80% of the value, the loss is reduced by the relation of the limit to the actual RC.  ie. If you only insured $70,000 and the RC was $100,000 then the loss would only be paid at 70%.

The other aspects of the policy would not be impacted.  So, it is likely that they would pay you the Actual Cash Value first and then the remainder once you have rebuilt.  Your Agent should be able to help you with how the claim will be processed, why the payout is less than you expect, etc...

Brett Hennessy · Answer

@John Mocker

Thank you John. I had it insured at 80% rebuild cost so if they deem it a total loss do you think they would still wait until the construction was complete?

How does the depreciation figure into the equation?

Brett Hennessy · Answer

@Chris Seveney

Thank you Chris. Mortgage company is my first call on Monday. This one is in a very nice area. Much bigger and nicer houses going up across the street. Would like to hang on to it if the # work.

Brett Hennessy · Answer

@John Mocker

Makes sense, thank you John.

First house fire, any advice or wish I had known?

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