The devastation caused by the Palisades Fire has left many homeowners facing the difficult decision of how to move forward after a total loss. If you are insured under a policy that includes Extended Replacement Cost Coverage and Building Code Upgrade Coverage, you have options beyond simply rebuilding at the original location.
Insurance Proceeds Can Be Used to Purchase a New Home
One of the major benefits of homeowners insurance policies in California is the ability to take the insurance proceeds and purchase a new home instead of rebuilding. This means that, in the event of a total loss, you are not required to restore your property to its previous condition at the original location. Instead, you may elect to use the settlement funds to acquire a new home elsewhere, giving you flexibility in your recovery process.
What’s Included in Your Settlement?
If your policy includes Extended Replacement Cost and Building Code Upgrade Coverage, your total payout can include:
- The cost to rebuild the home at its original location, including materials and labor.
- Upgraded costs associated with rebuilding to meet current building codes.
- Extended Replacement Cost Coverage, which can cover costs that exceed your policy limits due to rising construction expenses.
Understanding the Limitation on Indemnity
While you have the flexibility to take the insurance proceeds and purchase a new home, there is an important limitation to be aware of:
The measure of indemnity shall not exceed the cost, including the building code upgrade cost and any extended replacement cost coverage, if applicable, to rebuild the insured structure at its original location.
In other words, the total amount of your insurance payout is capped at what it would cost to rebuild your home at the original site. If the cost to purchase a new home is less than that amount, you will receive only the lower amount. If the cost to purchase a new home exceeds the rebuild cost, you may need to cover the difference out of pocket.
Next Steps for Homeowners
If your home was lost in the Palisades Fire and you are considering your options, it is essential to speak with our team about your additional options, we can support you with the following:
- Review your insurance policy to understand the specific coverages and limitations.
- Consult with your insurance provider to confirm the total settlement amount available to you.
- Work with us to explore the best use of your proceeds—whether rebuilding or purchasing a new home.
While the aftermath of a total loss can be overwhelming, understanding your options and rights under your insurance policy can help you make an informed decision that best suits your future needs. Whether you choose to rebuild or relocate, the goal is to ensure that your insurance benefits are maximized to provide you with the security and stability you deserve.
For more information or to discuss your specific situation, reach out to our team today.
