Another misconception needs to be put to rest.

[MindPilot]

Several posters have commented that insurance payments will get people out from under their sub-prime adjustable mortgage (like we all have those because we all have to live in McMansions) and at least one poster has suggested that was the motivation for arson.

INSURANCE DOES NOT PAY OFF YOUR MORTGAGE! Can I be any more clear? INSURANCE DOES NOT PAY OFF YOUR MORTGAGE!

Insurance pays to rebuild your house. And for the year or so that you have live someplace else while your house is rebuilt, you continue make your mortgage payments. And pay your taxes. And your insurance. And your utility bills; yes, the electricity and water the construction crews require will be on *your* bill.

[DaveJ]

1. Okay, thanks

Not sure who would think that, but it's good to cover all bases.

Just wondering, shouldn't insurance pay ancillary fees like the motel and utility costs while a home is being rebuilt, the same way car insurance pays for the rental while the car is in the shop? It probably depends on the policy.

[Hondadriver]

2. Only

if you have the rider that would cover that, just like car insurance. If you dont select rental car reimbursement, then guess what, YOU pay for the rental.

[MindPilot]

3. Yes they do.

Additional living expenses are one of the few things they cover without too many questions, and most policies cover them up to two years.

[DaveJ]

5. Seems fair

They pay for the utilities of temporary housing, and you pay for the house's utility as you normally would. Anyway, I wish them best of luck, even though I'm not allowed to have a home and can only dream of having these problems.

[sandnsea]

4. It *can* pay your mortgage

That's up to the individual. You don't *have* to rebuild. If I had a crappy mortgage and my insurance would cover it, I'd definitely pay it off and get a new loan with a good fixed rate.

[MindPilot]

6. But that's not how it works. They don't write you a check to spend how you wish.

They write the check for the builder/contrator. You get to endorse it as does the lender, but it isn't your money.

If you have a small loss to the structure, say $10,000 or less, yeah they just write a check. But over that, you get a check made out to you the builder and the mortgage comany.

[sandnsea]

7. Well I didn't say that

now did I.

If you want to pay off your house, the insurance company will write a check to the mortgage company.

You are giving people wrong information regarding their homeowners policy.

[MindPilot]

8. Yes, you did. And no I'm not.

Yes they will under very specific circumstances pay off the mortgage, but then they essentially will own the property and that is not the business of insurance companies.

This is a standard Homeowner's policy from the CA Dept of Insurance:

Mortgagee interests and obligations

If loss hereunder is made payable, in whole or in part, to a
designated mortgagee not named herein as the insured, such interest
in this policy may be canceled by giving to such mortgagee a 10 days'
written notice of cancellation.
If the insured fails to render proof of loss such mortgagee, upon
notice, shall render proof of loss in the form herein specified
within 60 days thereafter and shall be subject to the provisions
hereof relating to appraisal and time of payment and of bringing
suit. If this company shall claim that no liability existed as to
the mortgagor or owner, it shall, to the extent of payment of loss to
the mortgagee, be subrogated to all the mortgagee's rights of
recovery, but without impairing mortgagee's right to sue; or it may
pay off the mortgage debt and require an assignment thereof and of
the mortgage. Other provisions relating to the interests and
obligations of such mortgagee may be added hereto by agreement in
writing.


Company's options

It shall be optional with this company to take all, or any part,
of the property at the agreed or appraised value, and also to repair,
rebuild or replace the property destroyed or damaged with other of
like kind and quality within a reasonable time, on giving notice of
its intention so to do within 30 days after the receipt of the proof
of loss herein required.

Abandonment

There can be no abandonment to this company of any property.

When loss payable

Except where assessment is required as hereinafter provided, the
amount of loss for which this company may be liable shall be payable
60 days after proof of loss, as herein provided, is received by this
company and ascertainment of the loss is made either by agreement
between the insured and this company expressed in writing or by the
filing with this company of an award as herein provided.

http://www.leginfo.ca.gov/cgi-bin/displaycode?section=ins&group=06001-07000&file=6010-6021

[sandnsea]

9. I think you can't read

I said if I had a crappy loan, I would pay off the mortgage and get a new loan.

I didn't say anything about abandoning property or getting money to do whatever I wanted or anything of the sort.

You concluded that all by yourself.

You do not have to rebuild. You can pay off the mortgage and sell the land. You can pay off the mortgage and let the land sit. If the mortgage is paid off, nobody has any right to tell you what to do with the property, unless there are local covenants.

You're misinforming people.

[renie408]

10. Wouldn't the land be part of the original loan? And wouldn't you only get

enough money to rebuild? So, even if your house was totaled and you got enough money to rebuild, it might still not be enough to cover the crappy loan you got?

[MindPilot]

11. Obviously I'm a complete moron.

"I said if I had a crappy loan, I would pay off the mortgage and get a new loan." (the implication in your hypothetical being that you are using funds from an insurance settlement resulting from a total loss of your house by fire.)

OK, in short sentences with easy-to-understand words--I'm really stupid, remember--please explain to me exactly how an insurance payout is going to allow you to pay off the mortgage and rebuild? And please provide a link to the site of the company that would write such a policy.