If a home is condemned and has to be torn down, will homeowners insurance cover this?

UPDATED: Jun 5, 2011

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If a home is condemned and has to be torn down, will homeowners insurance cover this?

If a home has mold issues, really bad wiring issues and structural issues, would it just be torn down and rebuilt? If so, would homeowners in cover this? Would the current mortgage just transfer over to new home? This would also be in a unincorporated area.

Asked on June 5, 2011 under Real Estate Law, Illinois


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

There is no easy answer to this question--you need to consult with an attorney who can evalute the policy and the situation in detail. Here are some things to bear in mind:

1) The issue with regards to wiring, structure, and mold is a) can the conditions be remediated without tearing down the whole building, or b) does it have to be a tear down and rebuild. The law does not require one solution or another; the issue is, if there are code violations and/or significant safety/health issues, what *can* be done and what is *economical* to do.

2) Insurance policies are contracts; whether and what it will cover depends on the coverage terms of the policy. You need to review your specific policy to know.

3) It is likely the case where if the rebuilt home could be considered a "renovation"--even a VERY thorough one--the old mortgage would stay in effect. But if it is considered a new structure, probably not.

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