Hi Kathy,
You are asking very important questions regarding your post-wildfire loss.
Yes, in most cases you can proceed with purchasing a replacement home before the final Replacement Cost Value (RCV) is fully resolved, especially since the insurer has already confirmed that the property qualifies as “like kind and quality.”
Under California law and most homeowner policies, replacement cost benefits are based on what it reasonably costs to replace what you lost—not on whether every line item of the rebuild estimate has been finalized at the time you purchase. Many policyholders move forward with replacement purchases while cost negotiations continue. That said, we strongly recommend that you clearly document in writing that the RCV claim remains open and unresolved, and specifically outline any items that are still disputed or under review.
The primary risk of purchasing a home before finalizing the RCV negotiation is typically one of leverage, not eligibility.
Once a replacement purchase is completed, insurers may argue that the purchase price reflects the “true” replacement cost, even if rebuilding would cost more—an outcome that is generally not in your best interest. It is especially important to clearly document if any remodeling or upgrades are needed to make the replacement home equivalent to what you lost. Often, bathrooms, kitchens, or other features must be upgraded to match the like kind and quality of the materials or features in the fire-damaged home.
To reduce the risk of the carrier undervaluing your loss, we recommend the following:
Confirm in writing that purchasing the replacement home does not waive your right to continue negotiating RCV.
Preserve all estimates, expert opinions, and documentation supporting a higher rebuild cost.
Avoid signing any release, settlement, or “full and final” language tied to the purchase.
Purchasing a home may also affect your Fair Rental Value or Additional Living Expense (ALE) coverage, and this area requires particular caution.
In California, ALE (also referred to as Fair Rental Value or Loss of Use) typically ends when one of the following occurs:
You are able to repair or replace the damaged home,
You establish your household elsewhere on a permanent basis, or
Your policy time or dollar limits are exhausted—whichever occurs first.
If you move into the replacement home, insurers often take the position that ALE ends at that point, even if the home was purchased without insurance funds and even if your RCV claim remains open, because permanency has been established elsewhere. However, a key consideration is when the home is actually occupiable.
We recommend discussing this timing carefully with the carrier, particularly if the replacement home requires repairs, upgrades, or remodeling to meet the like kind and quality standard. You may need additional time after escrow closes to complete this work before taking occupancy.
United Policyholders has several helpful publications on these topics, which we encourage you to review when considering whether to buy or rebuild:
https://uphelp.org/claim-guidance-publications/buy-or-rebuild/
https://uphelp.org/ask-an-expert/question/buying-rather-than-rebuilding/
As always, we recommend confirming any verbal guidance from your insurer in writing.
You are doing exactly the right thing by asking these questions before taking action. We know how exhausting and overwhelming this process can be, and we’re glad to support you as you move forward.
Warm regards,
United Policyholders
