Home Burned Down

[saralara669]

My mothers house burned down. Over the past year, my mother has been canceled by 3 insurance companies, (for having a log home, being too far away from a fire station, and unfavorable placement of a swamp cooler.) The mortgage company insured the home for $175,000 while my mother still owed $226,000. My mother can not rebuild a comparable home for that amount. We thought about using the money to settle the loan, they refused. We asked if they would refinance the remaining amount, they refused. My moms house was 1250sqft, on average it costs $200 a sqft to build from the ground up. Meaning my mother could only rebuild a house of 897sqft. There are 6 people homeless right now. Is this legal for them to do this? What can we do?

 

[Duranie]

I think so. It sounds like your mom was underinsured. If she was upside down on her house then they are only going to rebuild it for what she had a policy on. So if she owed 225k+ why did she insure it for only 175k? If she had trouble finding a policy that would cover the whole amount, that is what comes with living in a very high risk house, hence why it burned down in the first place. Just because you live in a house and have a high mortgage does not mean it is insurable.

 

[saralara669]

Maybe I should clear things up. My moms home insurance was canceled. The mortgage company put insurance on the house. While you have a loan the property must be insured. They insured the house for $175,000. This amount is lower than the amount owed on the loan. How can they insure the house for less then the amount of the loan. You would think that they would at least insure it for the amount owed to them.