Hurricane Season/Insurance Question

[PCGumshoe]

Okay, this may sound stupid.

I bought my house in 2006, first home. I hate it (now) but that is my wanderlust speaking. The purchase of this house was an investment and now I'm ready to move on. I know that NOW would be a terrible time to sell my house for two reasons, Hurricane Season and the Housing Market.

In 3-5 Years, I should see a significant return on my property, however, with the current media hype about how terrible hurricane seasons are supposed to be, I've been paying particular attention to my insurance policy.

I renewed my policy on the 1 year anniversary of my purchase and noticed that if a hurricane came and blew my house off my property (or destroyed it completely), that I'd be able to pay off my mortgages and own the property outright if I didn't rebuild and I'd own a lot and

1/2 free and clear.

Is this view of my insurance reasonable? Should a hurricane destroy my house can I use the insurance money to just pay off the mortgage outright and not rebuild? I'd think there are people who were affected by Katrina who might not have wanted to return to that area because of similar situation.

Thanks

[Edwin Pawlowski]

Yes, it does.

That is a question best answered by your insurance agent and lawyer. None of us here have read your policy and anything we say is speculation. Insurance laws vary from state to state.

[mm]

But the question is, How can you start a hurricane?

[PCGumshoe]

That's funny... I'm not intending on INTENTIONAL, but I'm just saying. I'm an EARTH QUAKE kid... grew up on the other coast, if we get hit by the BIG ONE, I doubt I'd want to stick around and enjoy everyone's misery, if I can pay off my mortgage, I can move back years later when things settle down and I can rebuild then when it is less competitive.

It was a silly question, I guess, but I suspect that there are lots of Katrina victims that like their new living locations and fear another hurricane and might opt for this.

[trader4]

"I renewed my policy on the 1 year anniversary of my purchase and noticed that if a hurricane came and blew my house off my property (or destroyed it completely), that I'd be able to pay off my mortgages and own the property outright if I didn't rebuild and I'd own a lot and

1/2 free and clear.

Is this view of my insurance reasonable? "

No. The insurance should be sufficient to cover the cost of replacement of the structure. Suppose you have a house that would cost $500K to rebuild and you have a $200K mortgage remaining. Would you be happy with a $200K check if it's destroyed?

Should a hurricane destroy my house can I use the insurance money to just pay off the mortgage outright and not rebuild?

You should check your policy and/or insurance agent. In every case I'm aware of, the answer is yes. Whether it's a house, car, boat, or watch, the insurance company isn't going to make you buy a replacement.

I'd think there are people who were affected by Katrina who might not have wanted to return to that area because of similar situation"

[HeyBub]

Old Yiddish joke:

"So, Reuven, how are things?" "Wonderful. Last year we had a fire in Brooklyn, but insurance came through. Tell me, Moishe, how are things with you?" "Wonderful also. Last year in Florida we had a hurricane but our insurance paid off and we're back on our feet." [pause] "So, tell me Reuven, how do you have a hurricane?"

[Kurt Ullman]

Oh a very nice twist on a classic (grin).

[Nick Hull]

He would be lucky if the insurance paid $200K on $500K insured damage ;)

[PCGumshoe]

Oy vey!

HA HA HA... that was funny.

Actually, that's why I asked, when I added up all the structures (Dwelling, Other Structures, Garage Apartment) I actually come out $4000 ahead. My personal property isn't even included. My insurance is "replacement" with ordinance allowance of 25%. So, if I have to rebuild, they will pay beyond the value up to 25% if the house needs to be brought to a newer code.

My insurance is the State Fund insurance here. Can't get regular because of Hurricanes.

[mm]

Should be and is are two different things. Generally, and I presume this is true for the structures as well, insurance only pays what the property is worth, what you could sell it for. If your house was rundown and needed a new roof, had termite damage in the important timbers, etc. buildders don't know how to build an old or run-down house, so the insured has to pay the difference, or build a smaller house.

There have been a lot of policies in the last 30 years that pay replacement value for contents and probably for the structure. But they say that in the policy. If the policy is written to pay only what the property is worth, and you have 500,000 insurance for a house that costs 500,000 to rebuild, but the house is run down, they will pay only the 300,000, say. I don't know if they have to return the excess premiums you've been paying or not, but that is small change.

I don't know how many companies sell only replacement-value, how many sell both, and how many only sell current value. I don't know how many salesmen lie.

In a way there is a special risk in writing replacement-value insurance. A large part of the increased value is inflation, which should affect the investments the insurance ocmpany makes with your premiums, but it could be that construction and material costs increase faster than inflation. Especially I would think on the gulf, where so many need reconstruction at the same time. Of course the premium charged is designed to consider all these things, including the parts that are not known.

No. Read your policy, and deal with reliable companies. (I've heard in the hurricane some that were reliable seemed not to be so, but maybe that is what people say who didn't read their policies, even when the saleman explained things correctly.)

That's what I've seen too. Some defendants on the TV court shows complain when the plaintiff wants to use the money for something else, but they wouldn't think that if they were the plaintiffs.

I'm sure.

[mm]

Yes, exactly. I know gumshoe is not intending to start a fire or hurricane, but I wss deternined to put that punchline in there somewhere.

That is of course why sone fires get started, so the owner can get his money out of the business when for some reason he can't sell it for what he thinks it should be worth. Which implies that one doesn't have to rebuild, which was also a question in the OP's post.