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Ask Dave

Rebuild Or Repair?

After a fire, Marilyn's son has two choices for his homeowner insurance money. Which should he choose?

QUESTION: Marilyn’s son had a fire in his house on June 6 and it destroyed the house foundation. He has two mortgage totaling $50,000 on it. Is he bound by law to use the homeowner’s insurance money to pay off the house, or can he rebuild?

ANSWER: He can use the insurance money to rebuild. Typically, what happens is your homeowner’s insurance has named the insured, in this case your son, and the bank as co-insured. Any checks that are made are made out to both of them and they are released only if the mortgage is paid off or only if they are rebuilding and the money is being sent to a construction company. He can’t just cash the check and put the money in his checking account.