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Cash Settlement

If the cost to rebuild my property exceeds my policy limit, is my only option a cash payout?

You can always rebuild, but if your policy does not provide Guaranteed Replacement Cost endorsement, the most your insurer will pay to cover the cost of the rebuild is the policy limit.

If your policy contained a Guaranteed Replacement Cost endorsement and you meet all the conditions under the endorsement, you are covered for whatever it costs to rebuild, even if it’s greater than the policy’s limit for the home.

What happens to the land if I choose a cash settlement?

The insurance contract does not cover the land. If you were the owner of the land, you will remain the owner of the land. The land does not transfer to your insurer.

What happens to my mortgage when I make a claim?

If you take a cash settlement for your loss rather than rebuilding, your mortgage lender will be entitled to receive the insurance money for the loss of the house, up to the balance of the mortgage.  If there is still money owing on the mortgage after the lender has received this money, you will still owe the balance.  If you are the owner of the land on which the house was located, you might consider selling the land and use the funds to pay toward the remaining mortgage balance.