On Sun, 31 Oct 2004 09:59:45 +0000, Stefek Zaba
wrote:

Phil Addison wrote:

I am querying the whole basis of the idea that the insurance should be
based on the need to re-build. I want to know why we can't be insured
just sufficient to be able to buy a similar replacement home.

If "we" own the house outright, such a decision is ours to make. But
most "homeowners" have a mortgage, and the mortgage provider wants very
much to cover their backside, which they see as meaning that in the
event of a total loss, a property with no less than the existing one's
full resale value will appear in place of the smoking heap. (They would,
I presume, argue that even if the outstanding mortgage was only, say,
30% of that value, their lending criteria had given that mortgage on the
basis of covering a particular proportion of the purchase cost, and
you'd be nadgering their carefully-constructed risk-of-nonrepayment
profile if you put up a yurt in place of the elegant Georgian pile.
Though if they got their outstanding mortgage repaid, I don't see it's
any business of theirs what your future housing derangements might be...)

No, they don't care about that, they just want to know their monetary
investment is safe. The terms of the mortgage deed give them first call
an any insurance payout to clear the outstanding loan - that's why they
insist you have insurance.

The insurance company will check if there is a mortgage on the property,
or any other "interested party" involved, and would only pay out the
balance to the owner, assuming there is actually some positive equity.

I don't see that this impacts on the basic principle I am asking about.

Phil
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