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Dutchess_III's avatar

If our house was destroyed, would we have to build a new house on our current lot, or could we build it somewhere else?

Asked by Dutchess_III (26710 points ) April 2nd, 2014

Just got notice of our second tornado warning this year, and I just started thinking…if, heaven forbid, a tornado destroyed our house, and insurance paid for us to rebuild, would we have to rebuild on this same lot, or could we build a new house at our land?

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19 Answers

rojo's avatar

I don’t know but would be interested to find out and so am going to follow the question.

Dutchess_III's avatar

I could call the insurance company, but if there was a tornado they’d suspect….something. That’s just the way those people are!

Hypocrisy_Central's avatar

I would say it would be dictated by the size of the lot, the setback rules, and the policy as to if they said they would repair the house and what they considered the house to be. If moved or re-orientated they might consider it a new structure, not a repair of the old structure, and thus not covered by their policy.

Dutchess_III's avatar

No, I mean, if it had to be razed. Completely gone.

Hypocrisy_Central's avatar

If it were completely wiped out by the tornado then I would say it would be determined by the city, if a new foundation was poured, the city may see it as a new creation, not just putting things back on the existing foundation which can be seen as all that is left of the original house, but still the original house. Then it comes back to if the company want to honor the policy if the city says it is a new house, because of the new foundation and location, or the same house just in serious need of repair.

janbb's avatar

I believe you would get the estimated value of the house and then you could replace or build where you’d like but I am not sure of this. (When you total a car, you get a check for its replacement value and then you can buy whatever you like.)

zenvelo's avatar

Insurance goes with the lot and any improvements (i.e., a house). So you rebuild where you were, unless there was a reason you had to move, like a river shifting it’s banks, or a hurricane washing away the land it was on.

Homeowners insurance does not cover the cost of a lot, so if you were to rebuild elsewhere, you would be out of pocket on the new lot.

Dutchess_III's avatar

Well, we own the new “lot.” It’s 5 acres.

janbb's avatar

You could read your policy and see what it says if anything about rebuilding. I do think once they’ve settled the claim, they don’t really look at what you do with the money.

Dutchess_III's avatar

So they’d just cut you a check, say “See ya later!”

janbb's avatar

Once they decided for sure that your house was totaled and the adjuster saw it and the claim was investigated. That is my understanding; don’t quote me on it.

Hypocrisy_Central's avatar

@Dutchess_III So they’d just cut you a check, say “See ya later!”
They are an insurance company, they want to say “see ya” with as little money as they can get away paying you with.

Dutchess_III's avatar

Well, this is a bit mooky. Just got a thunderstorm warning which means we’ll probably get hit. Massive storm clouds moving in from the south west AND the south east, looks like they’ll converge right over my house. Time to move stuff toward the cellar.

Adirondackwannabe's avatar

They’ll cut you a check for replacement value or actual cost value, depending on your policy, payable to you and your mortgage holder and then they’ll ignore you. It’s up to the bank and you what you do from there.

ibstubro's avatar

I agree with @Adirondackwannabe.

I’m in the process of replacing my roof, and State Farm depreciated it by 40%. That means I got an immediate check for 60% and the balance when I either:
a.) sign with my (company approved) roofer or
b.) my roof replacement is completed by another roofer.

I don’t understand how insurance is paying enough to replace the roof, and pay the deductible plus a profit of a couple/few hundred dollars. Oddly enough, I declined to bring that to the attention of the adjustor. ;-)

But, to your question, they’re not dictating how I spend the money, only that I show proof that I paid someone to replace the roof. You would probably be in good shape because it would be difficult for the insurance to find a ‘comparable’ property to put you in. If you were in town and they could buy a similar property for ½ the cost of insured value of your current home, you’d have a battle on your hands.

In 10 years my home insurance had inflated the value by ⅔. Meaning (for example) a $100,000 house is valued at $175,000 in 10 years time, even though it has had negligible appreciation. The danger in that is that if you lose your home and the insurance company can buy you the same or better for $115,000, they will. So you’ve paid high premiums for nothing.

JLeslie's avatar

My insurance would not let me just build somewhere else if I understood the answer correctly when I once asked a similar question. I hope I misunderstood. The way it was told to me was the house would have to be rebuilt the same. What I mean is, I didn’t really love the floorplan so I was curious if I could rebuild a different house if God forbid something happened, and the agent said I would probably not be able to do that. The woman probably thought I was planning to burn my house down. LOL. Seriously, God forbid. I would die inside if my house was destroyed, mostly because of the sentimental things I would lose. So, I am assuming you can’t just build on another lot. Maybe if there are extenuating circumstances and the municipality declares the land unstable or something?

I’ll be curious to know the right answer, be sure to let us know if you find out.

Dutchess_III's avatar

Now, why would my insurance company insist that I build a house identical to one that is over 100 years old?!!

janbb's avatar

(If I were still married to my Ex, I could get you an answer but I can’t now. I mean, to the original question. The answer to the second is they wouldn’t.)

JLeslie's avatar

@Dutchess_III I was surprised to. I hope I am wrong. If my last house had been demolished from some act of God, I would have wanted to not recreate the bonus room above the garage. Now that we are talking about this further I am remembering the conversation better. I also would have made it one bedrooms fewer. So, when I discussed insurance coverage I was arguing for lower coverage, less expensive for me, because I did not want to recreate parts of the house. The agent advised against it and then I asked something along the lines of being able to pocket the extra money, or spend it in another on the house, and she said the insurance is for that house and recreating that house, or something along those lines.

I didn’t go on and on with the conversation, because it was all such a remote possibility, nothing I would ever wish for. Maybe I misunderstood? I would have eliminated the bonus room and used some of the money towards an additional garage for the property.

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