Total Loss Questions

[Guest]

In Sept we had a house fire the insurance declared it a total loss. I am insured for $126,000 with guaranteed replacement cost bringing it up to about $150,00. I am under insured and this is my fault I should have been paying closer attention to the amounts I was insured for. At the highest amount that I can receive I cannot rebuild in my area for this amount. My question is can I (legally) get the insurance to just cut me a check for the $150,000 and rebuild something, even a modular home? I have a couple of bids to rebuild and they both exceed the max amount that I am insured for. Plus the demolition comes out of the amount paid for the structure. The adjuster is not very forthcoming with answers. He only answers emails and no matter how many questions you ask in an email he only answers one of them. They have paid the first round of contents and have paid loss of use claims. They were even here the day after the fire with a $4,000 check (against the contents). I cannot get a straight answer from ANYBODY about how the structure is paid. If I do not do something soon I will have to wait until spring to rebuild. Thanks for any help you can give me!

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[Josh]

It's "let's make a deal time". They'll generally only pay up to the limits if you're actually going to rebuild. You may find a contractor willing to do a more bare bones type construction for less money and/or do the finish work yourself and/or with your own paid help (painting is easy enough to do yourself for example).

It's most likely up to the carrier. You can always ask for a check for the amount they would give you free and clear, the answer might be nothing, but it'd at least give you an idea of where to start.

Sorry to hear about your loss to, losing a home can be traumatic, even if the claim is handled smooth as glass because of the right insurance coverage.

 

[Aram Fingal]

The way the contract language is usually written, the replacement cost coverage only applies if you are actually replacing the property that was damaged (in this case the house). If you're not going to replace it, then you're looking at an actual cash value settlement which will be considerably less. That could end up being as little as 50% of the cost to replace (possibly even less than that depending on the age of your home).

Ask them what they would be willing to give you for a cash settlement. But be prepared for a low offer.

 

[NCAgent]

Also if you have a mortgage then the money goes to them first for the loan amount. If you have a high mortgage then you are going to have not much money left...

Try to get something built. Then the collateral for the loan is still there. My humble opinion.

 

[Guest]

Also if you have a mortgage then the money goes to them first for the loan amount. If you have a high mortgage then you are going to have not much money left...

Try to get something built. Then the collateral for the loan is still there. My humble opinion.

Yup, that's right. I had a client with a total loss about two years ago. He bought the house when the banks were handing out mortgages like they were ink pens.

Fast forward to 2010, his credit sucks and banks aren't lending as easily. His house burned down. He ended up with a $197,000 going to his bank, and him getting $1000 and a 20 year old mobile home.

 

[djs]

I somehow missed this thread.

You have 2 issues here, one is mentioned already.

The first one, without rebuilding, the insurance companies will only pay actual cash value (basically, the depreciated cost) of the house. This will be significantly less. In addition to this, they will not pay extended replacement cost without rebuilding, since its a coverage that only applies to rebuilding the home.

The second problem will depend on how far off your coverage is. If you are less than 80% insured, then you can end up with a co-insurance problem. In a nutshell, this means if you are not fully insured, you can own part of the loss in addition to your deductible.

My suggestion? Have the contractor hire you and do a lot of the work yourself. Do whatever you can to bring the costs down to the insurance amount. I don't know how much you are missing by, so its tough to know if this will even work.

Dan