If my home is completely destroyed by fire, can I get a payment and choose not to rebuild?

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Jul 1, 2012

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Insurance Question from Carbondale, CO

Asked on 07/01/2012

If my home is completely destroyed by fire, can I get a payment and choose not to rebuild? Does the payment vary depending on the Ins. Company?Does the 80% rule apply to all companies?

Answer given on July 01, 2012

Each insurance company handles total losses and the decision not to rebuild differently. Some companies will pay you the full amount of insurance if you decide not to rebuild. Some companies allow you to rebuild in a different location and will still pay the full amount (up to the limit and the extended replacement cost limit) as long as you rebuild. However, if the costs to rebuild at the new location are higher, they will only pay the amount it would cost where you previously lived. For example, you live in Colorado – if you choose to rebuild in Hawaii it may cost more to build so your policy could have a limit applied.Many companies will pay you actual cash value rather than replacement cost if you choose not to rebuild. The 80% rule usually does not apply, but there could be some companies that use that.Talk to your agent and/or adjuster to see how they will handle a decision not to rebuild. You may find it beneficial to rebuild rather than take the lower amount and then try to sell an empty lot.

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