Our insured has a standard HO-3 policy. They suffered a total loss of their home due to a fire. They have elected to not rebuild on the insured premises, but instead have purchased another home in another location.

To date they have been paid the ACV of the insured dwelling. What is the obligation of the insurer to pay up to the RCV of the original insured structure, if any, and would real estate closing costs on the replacement dwelling be considered as part of the covered loss?

Virginia Subscriber

Once the insured has replaced the dwelling, the carrier should pay the RCV. The standard loss settlement provisions apply, that the insurer pays the lesser of the limit of liability, the replacement cost of the damaged areas, or the necessary amount spent to repair or replace the building. Closing costs are part of the replacement of the building and should be covered.