Chapter Overview: Insurance Considerations in California When Selling a Home or Damaged Lot
Selling a home or damaged lot after a disaster in California involves complex insurance considerations, including how Extended Replacement Cost (ERC), Ordinance or Law Coverage, and Land Value affect financial outcomes. This chapter helps homeowners to understand these coverage types to avoid disputes with insurers.
It should also be noted that these Rallybacks are meant as background material and if a homeowner is interested in going down this path, they should consult with a licensed Loti Public Adjuster.
Extended Replacement Cost and Selling a Home or Lot
Extended Replacement Cost (ERC) provides additional insurance benefits beyond standard replacement cost to cover rising construction expenses. Under California law (AB 1800) and legal precedents such as Conway v. Farmers (1994), homeowners can use ERC benefits toward purchasing a replacement home rather than being forced to rebuild.
This article walks through how this law prevents insurers from limiting payouts based on location and ensures homeowners receive full ERC coverage whether they rebuild or relocate.
Ordinance or Law Coverage and Its Impact on Selling
Ordinance or Law Coverage helps homeowners cover the costs of bringing a home up to current building codes after a disaster. While this coverage is critical for rebuilding, its application when selling a home or damaged lot depends on policy language. Some policies may allow funds to be used for required upgrades in a replacement home, while others restrict payouts to rebuilding only and this article outlines area that may be of interest.
Land Value and Insurance: Key Considerations When Selling
One of the most misunderstood aspects of insurance is that land value is not covered in an insurance payout. This means that when a homeowner sells a damaged lot instead of rebuilding, they do not receive any compensation for the land itself—only the insured structure and Personal Property. California law, including Insurance Code 2051.5, protects homeowners by preventing insurers from deducting land value when ERC is applied to purchasing a replacement home. This article outlines the verbiage so sellers can be aware of these laws to avoid unfair reductions in their insurance payout.
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Selling a home or damaged lot in California after a disaster involves carefully navigating insurance rules to maximize benefits. Extended Replacement Cost ensures homeowners can relocate without losing coverage, Ordinance or Law Coverage may or may not apply to a new home, and Land Value is not covered in payouts but cannot be unfairly deducted by insurers.
These are among a number of insurance related issues to discuss with your Loti public adjuster and consider when selling a damaged lot in a disaster zone.