I was just pondering a question. With the real estate market down so much the replacement costs of homes is far greater than they are selling for in some areas.
With that in mind say a house costs $200,000 to replace in a total loss but cost only $100,000 to buy. Can you just insure it for say $110,000? Then if there is a total loss. Go ahead and bulldoze it, pay off the mortgage and sell the land as a vacant lot.
That seems to make more sense to me. If you did have a total loss and got more money than the house was worth. Why would anybody in their right mind have the house rebuilt, have to stay for months in a rental house or lose out on rental income, just to have a house worth less than it cost to build? When they could have paid off the loan, knocked down the house, sold the land (or keep it for an investment) and just bought another house that is nearly paid off for that $200K.
I'm asking because I've been quoted two rates by different insurance companies on rental property. One only allows insuring based on the estimated replacement cost while the other lets me set any amount at or below replacement cost. As you can imagine the latter is much cheaper. But this made me wonder at the legal aspect. Since laws and logic often do not mix.
I suppose I should ask a lawyer in my area. This may be something someone here in Georgia has some experience with.
With that in mind say a house costs $200,000 to replace in a total loss but cost only $100,000 to buy. Can you just insure it for say $110,000? Then if there is a total loss. Go ahead and bulldoze it, pay off the mortgage and sell the land as a vacant lot.
That seems to make more sense to me. If you did have a total loss and got more money than the house was worth. Why would anybody in their right mind have the house rebuilt, have to stay for months in a rental house or lose out on rental income, just to have a house worth less than it cost to build? When they could have paid off the loan, knocked down the house, sold the land (or keep it for an investment) and just bought another house that is nearly paid off for that $200K.
I'm asking because I've been quoted two rates by different insurance companies on rental property. One only allows insuring based on the estimated replacement cost while the other lets me set any amount at or below replacement cost. As you can imagine the latter is much cheaper. But this made me wonder at the legal aspect. Since laws and logic often do not mix.
I suppose I should ask a lawyer in my area. This may be something someone here in Georgia has some experience with.
