How would an insurance policy respond if a house valued at $200,000 was damaged by fire, and the town required the undamaged portion to be torn down?

In this scenario, the insurance policy would typically cover the damage to the section of the house that was directly affected by the fire. With the house valued at $200,000, the destruction incurred from the fire would be assessed, and the claims process would focus on the costs related to repairing or replacing the damaged portion.

In many cases, when a home sustains partial damage, the valuation is based on the cost to repair or replace the damaged part of the structure rather than the full value of the home. If the town requires the undamaged part of the house to be torn down, that requirement does not affect the insurance payout related to the damage caused by the fire.

Therefore, the payout reflects the value of the specific part that sustained damage. In this case, the policy would cover the costs to repair or rebuild the damaged section, resulting in a claim payment that corresponds to the value of that damaged portion of the property, which might be represented as $100,000, depending on the extent of the actual damage.