You buy $89,000.00 in Insurance on your house. It burns down. What should the Insurance Company have to pay?

Question

Got $89000.00 in Insurance and the place burnt down. Now the insurance doesn't what to pay.

Okay, It was NOT arson. The insurance Company is a company that you never hear of. They claim it is a total loss. We owe $90,000.00 on it but they don't even want to pay the $89000.00. This amount will not even replace it. The house caught fire while we were asleep for electric problem. I guess we'll just have to get a Lawyer.

Answer 1

Most insurance companies do NOT want to pay upfront until there investigation is done thoroughly. That could take up to one year or more.

Answer 2

If you bought a homeowners policy (starts with HO and can be followed with a number or letter), then (assuming it's a legitimate claim), they would pay the full amount for the structure, and an amount equal to 40% or 60% that amount for the contents. However, it also depends on if you were insured for at least 80% of the replacement cost.

In addition, as others have said, they may be investigating the cause of the fire. Even if you or a family member is responsible for it, they still should pay, unless it was a deliberate act. In many states the company has 90 days to either pay or state a written reason for delay or denial. Even so, they should be paying an amount equal to 10% or 20% of the $89K as temporary living expenses, like a hotel or rental unit.

If it was an unoccupied structure at the time, and you had not declared it as unoccupied, they may be able to deny the claim. Also, if you were carrying homeowners coverage, but renting it to another, they may be able to deny the claim.

Answer 3

I think that you have a Coinsurance Penalty. Coinsurance is the way to reward the insured that insures to value and to penalize the one that does not. A rate credit applies if the insured agrees to insure to 80%, 90% or 100% of value. If an insured decides not to insure to the amount required by that percentage, the rate is surcharged. In addition, the property may not be eligible for some preferred insurance coverages otherwise available. Insuring to value is a great idea but what happens if the insured promises to do so and later reneges on that promise? The coinsurance penalty is the “stick” in the “carrot and stick” approach to encourage insurance to value. The insured that does not insure for the promised limit of insurance becomes a co-insurer when a loss occurs. This is a party that participates with the insurance company in paying part of the loss.

Here a example that the coinsurance work:

The value of the covered property at the time of loss:
(The value at policy inception is irrelevant.)

Example: The Kelley Hardware property policy covers stock and other business personal property. The value at the policy inception date is $100,000. Kelley decides on 80% coinsurance and purchases an $80,000 limit and a $1,000 deductible. At the time of a fire three months into the policy period, the total value of stock and other business personal property is $120,000. The fire loss is $50,000. The value used when considering application of a coinsurance penalty is the $120,000 value at the time of loss, not the $100,000 value at policy inception.

Answer 4

What is their reason for not wanting to pay?

Have they actually issued you a denial stating that they aren't going to pay?

How long ago did this happen? e.g., if the fire was last week and you're wondering why you don't have your check yet, it's probably because they haven't finished investigating.

Has the fire department issued a report yet? Is arson suspected?

There is a lot of information you have failed to give here. Post some more information like how long ago this happened, what the insurance company has actually stated with regards to the claim, etc.

Also, just because you have a policy that has $89,000 worth of coverage does not mean you'll get a check for $89,000. Depending on how your policy is written, you'll get ACV, Actual Cash Value, for the building or you'll get Replacement Cost for the building. The first determination will be was the building worth $89,000?

Answer 5

Stop all payments and speak with a legal counselor. Sue your insurance company not just for damages to the home but also for the undue stress they have placed on you and the other inhabitants of the home. Call your local housing authority to find out if they are able to assist you in any manner. They may be able to point you in the right direction. As for the mortgage company, put the money you would pay them into a separate account until after things are settled. Let an attorney handle it.

Answer 6

Why did your house burn down? The cause of the fire must be investigated since some cases are arson. Insurance companies typically don't pay right away unless it is a clear source of ignition over which you had no control (like electrical fire or lightning strike).

Answer 7

While this is being investigated, make sure the insurer is paying for under the "Loss of Use" coverage for not having the use of your home during this period. Also they are to pay for the loss of your personal belongings as outlined in your coverage. And, there should be coverage for any outside buildings that were damaged or destroyed. This is assuming you are in a single family home as opposed to a townhome or condo.

If your policy is unavailable to you, request a duplicate copy.

Answer 8

the insurance company will pay the value of the rebuild (provided you have enough coverage). They are not necessarily going to pay you $89,000, unless the cost to rebuild is that much.

Sometimes (depending on the verbiage in the policy) they will actually pay more than 89,000, if you have extra coverage such as building code upgrades, guaranteed replacement value, etc. However, it all comes down to how much it will take to rebuild, and it all depends on the coverage you bought at the time you insured it.

Answer 9

Why not? There are all kinds of reasons and conditions why they wouldn't pay, but the MOST likely reason (IF you're getting a flat out denial of coverage) is either you're suspected of burning it down yourself, or there was material misrepresentation on the application. Either one will void the policy, as far as the homeowner is concerned.

If they're offering a PARTIAL payment, then your house was probably underinsured. Note: houses are insured based on COST TO REBUILD, NOT the market value. But, you say they don't want to pay at all. They WILL give you a reason, in writing.

Answer 10

Help yourself - you can check your quotes in internet for example here - CHEAPTOINSURE.INFO

RE You buy $89,000.00 in Insurance on your house. It burns down. What should the Insurance Company have to pay?

Got $89000.00 in Insurance and the place burnt down. Now the insurance doesn't what to pay.