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Will insurance pay for a house that was completely destroyed?



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Say that you had your house insured for $175,000, and it was completely destroyed by a fire. You want to know if the insurance will cover costs to rebuild the house. If the cost to rebuild the house was $175,000 or less, then the insurance would cover all costs to completely rebuild the home. You may also find yourself in the situation that it will cost $200,000 to rebuild the house. In that case, your coverage was not high enough to completely rebuild, so you would need $25,000 out of your own pocket.


The HO-3 part of your policy only pays for the structural damages on replacement costs. So the insurance only needs to pay for the cost of rebuilding. The cost of rebuilding should be a very similar number to how much you insure your home for, so you will have less problems in the event of a disaster. It is a good idea to find out how much the cost of rebuilding would be, and you can find that out from your agent, or local home builders.


If there was a disaster that completely destroyed your house, there is one other option that you can choose to exercise. That would be to decide not to rebuild, and move somewhere else. If you did choose to rebuild, you would be paid the rebuilding cost minus the depreciation. Which basically means that you would be paid how much your house was worth. Meaning if you had a house appraisal today, that's what you would be paid. That value is almost always less than the cost of rebuilding.


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