Home Rebuild Cash Settlement

Dibble12

Hi there,

Our insurance company have recently received quotes to rebuild our house which have come in very high (approx £150k more than the house would be worth when built).

Even though it is the insurers money and taking all of the emotion out of it, I feel that this would be a huge waste of money and it does not make sense to pay this.

I asked the insurer about a potential cash settlement and they have provided a figure which was the value of the house, minus the value of the land. 

This amount would be about £300k less than the rebuild quotes and would not allow us to either rebuild ourselves or find a house the same size as the one destroyed.

I just wondered if this the usual basis of a cash settlement or if there is anything we can do to improve the offer?

Thanks

Hoenir

Is the property mortgaged? 

Dibble12

Hoenir said:

Is the property mortgaged? 

Yes it has a mortgage 

Nearlyold

The insurers position is probably down to the fact that if they paid you the cost of the rebuild in cash (which is greater than the value of the property) you would be better off than you were prior to the damage to your property. This would present a "Moral Hazard" in that other house owners with similar properties to yours might see this as a way of moving up the housing ladder. Ie buy a house where the rebuild costs are higher than the market value, then deliberately cause damage to the property.

Hoenir

neilbart said:

Hoenir said:

Is the property mortgaged? 

Yes it has a mortgage 

Are they aware of the damage to the property? 

Dibble12

Hoenir said:

neilbart said:

Hoenir said:

Is the property mortgaged? 

Yes it has a mortgage 

Are they aware of the damage to the property? 

Yes they are fully aware.

Dibble12

Nearlyold said:

The insurers position is probably down to the fact that if they paid you the cost of the rebuild in cash (which is greater than the value of the property) you would be better off than you were prior to the damage to your property. This would present a Moral Hazard.

Thanks for this. I did think about this and how they may feel that it sets a precedent but I can’t see anything in our policy about this and it just feels like a huge waste of money.

sheramber

The value you put on the house is the current market value of a second hand house.

The rebuild cost is a reflection of the current cost of materials and labour.

Two different values.

TELLIT01

It seems crazy to me to accept a cash settlement which is less than the rebuild cost of the property.  Presumably a large proportion of any payment would be required to pay off the mortgage.  What would you do about somewhere to live after the various debts were paid off?

Our current buildings insurance doesn't have a limit on the value of the property, which is one of the reasons I took that insurance.  All the risk lies with the insurer.

Hoenir

TELLIT01 said:

Our current buildings insurance doesn't have a limit on the value of the property, which is one of the reasons I took that insurance.  All the risk lies with the insurer.

You weren't asked for any information of this nature on the application form ? 

Nearlyold

neilbart said:

Nearlyold said:

The insurers position is probably down to the fact that if they paid you the neilbart said:

Nearlyold said:

The insurers position is probably down to the fact that if they paid you the cost of the rebuild in cash (which is greater than the value of the property) you would be better off than you were prior to the damage to your property. This would present a Moral Hazard.

Thanks for this. I did think about this and how they may feel that it sets a precedent but I can’t see anything in our policy about this and it just feels like a huge waste of money.

cost of the rebuild in cash (which is greater than the value of the property) you would be better off than you were prior to the damage to your property. This would present a Moral Hazard.

Thanks for this. I did think about this and how they may feel that it sets a precedent but I can’t see anything in our policy about this and it just feels like a huge waste of money.

Even without the moral hazard  the Insurers would also be left either with the cost of the rebuild or demolition so it makes no sense for them to pay you a cash equivalent to the rebuild.