Exactly right and not so different here. Claimant has a choice to have insurance company pay expenses directly, or can pay themselves, then seek reimbursement. Either way, I might be able to claim the donation of as a tax write off against future rental income, although I'm not sure I can do that unless the "Friends of...." account is registered as a non-profit corporation.Ju wrote: My experience with insurance is that you are allowed x for renting alternative accommodation, y to repair your house and z to replace lost items. If x is not used for rent it cannot be added onto y, it is simply kept by the insurance company. I suppose as an owner you could claim x from the insurance company and then donate it back to the tenants.
Ju
Building repairs of this nature would be calculated by $X per sq ft, not by trade $X for carpenter, $X for electrician etc. There's a band range for quality of building - and you don't get anything these days for less than $200 - $250 per sq ft. On an average size 3 bed house of say 2,500 sq ft, (this was at least 4 or 5 as it had a separate apartment for the retired parents, so probably more), you are looking at something like $500,000 to rebuild.
The amount that you can insure is calculated using tables provided by the insurance agent and takes market value into account somewhere down the line, then deducts the value of the land and comes up with a number that would be the amount insured for total loss. I'm not an insurance agent, so I'm not completely sure how it's done, but I know the number bears no relation to the actual cost of building.
Typically, a house that might cost $1million in today's market might have a rebuild cap of $300,000, the premium for which could be around $2,400 a year, something along those lines. The average family couldn't possibly afford to pay for anything like the real cost to rebuild, which could be three times that amount.
I believe that by law everything has to be insured at replacement cost these days, but a claimant will never receive more than the total $ rebuild cost of his policy, except something like 10% on top is allowed for bringing the building "up to code", which means into compliance with building regulations that may have been enacted since the house was first built. This was a fairly new house, so not much likelihood he'll have much to claim there.
I don't know the exact market value of the house that burnt down, but including the land, I can't imagine it would exceed $550,000 as a rough guess, and it would be normal for him to be insured for around $250,000 of that at best. So he is looking at finding another $250,000 out of his own pocket just to rebuild.
Contents are included on the same policy (I know that's different in the UK), and would normally be a percentage of the rebuild cost, with a minimum of maybe $35,000. At best he might have maybe $100,000, but quite possibly less, so the total amount the family will get back is probably in the region of maybe $350,00 - $450,000 at best, against a rebuild cost that could far exceed that number for a severely damaged house, which this one was. (What was not damaged by fire was lost to smoke and water).
Here, the insurance company doesn't care very much what you spend the money on, (except they won't insure it again unless they see receipts for replacement), they only care that you are claiming for risks they insure. As you say, claiming rent for alternative accommodation is one of the insured items, so he can definitely claim that on top of the rebuild cost.
They were given a budget of $4,000 to $6,000 per month for temporary accommodation. I don't know what they were paying in the hotel they just vacated, I'm sure more than that, although only for a few days. I told them I was not willing to hike my rates artificially (not that they asked me to do that, they did not). My rates are there for all to see online, so I agreed to invoice for the full amount of the published rates, which I would then donate to the family fire fund. I don't think there's anything illegal in my doing that. At that point it's my money to give, although in my brain I don't think of it as my money.
What might be a problem is claiming the donation as a tax deduction, which I would have to do to avoid paying income tax on the rent. I'm not quite sure how best to enter it into the accounts yet. My first thought was not to enter it at all, then there's no income, no tax to pay, no donation to claim, it's a wash. But I'm not quite sure if that's legal. Any other suggestions welcome.