My 96 year old mother is living in a house in a severely depressed city (Detroit) and her HO3 policy has $370,000 listed as the limit of liability for "Dwelling I" coverage. While this would be acceptable if she wanted to rebuild, at her age it is unlikely that she would rebuild, and even if she did rebuild, it would probably not be in this particular Detroit neighborhood. In the event of a total catastrophic loss, does she have any options other than rebuilding with an HO3 policy that has "Extended Dwelling replacement cost"? An additional concern is that the insurance company might think 'fraud' because the difference between the current valuation of the home is significantly less than the cost to rebuild. Mom wonders if it wouldn't be better to get a cheaper policy that had less disparity between the current market value and the $370,000 dwelling coverage. Her children are trying to get her moved to a better living situation, but we don't want to be right in the middle of fixing up the house for sale and have some catastrophe destroy it before we can sell it, so we have some concerns about having "actual cash value" as the kind of insurance on the house. Any feedback would be welcomed. Thank you!

About The Expert

Amy Bach

Amy Bach has been a professional advocate for insurance policyholders since 1984 and an attorney since 1989. She co-founded United Policyholders in 1991 and serves as the organization's Executive Director and primary spokesperson; shaping and overseeing the Roadmap to Recovery™, Roadmap to Preparedness, and Advocacy and Action programs. She is a nationally recognized expert on insurance claim and legal matters; frequently interviewed in print and broadcast media, and the author of numerous publications including "The Disaster Recovery Handbook", "WISE UP: The Savvy Consumer's Guide to Buying Insurance" and consumer tips and guides in the UP Claim Help Library.  Recognized by Money Magazine as a Money Hero, Bach is in her eighth consecutive term as an official consumer representative to the National Association of Insurance Commissioners, and is a member of the Federal Advisory Committee on Insurance.