The mortgage company definitely has an interest in ANYTHING put into that house - even after purchase. If you were to default, they'd get the whole house, not just the house minus your improvements. Seriously, your damages do affect the value of the current house. If you were to take the money and not repair, that overflow damage issue would affect the value of the home - if left undone. If, however, you had a claim for a damaged deck, or pool that was not part of the original purchase, the bank would happily sign off on the check if you chose to not replace those items. (You would have to properly dispose of them and make certain the evidence of the removal looks reasonable.) If you choose not to re-do the basement, the bank will require the toilet overflow damages to be repaired and have the basement cleaned up to the standards it was at time of purchase. My bank once had someone with the same issue -- homeowner fully finished basement after buying the house. Then the basement flooded. Homeowner did not want to do anything with the basement other than dry it out and then cash the check. He had flaking sheetrock, warped panelling, glue streaks all over the floor from the carpeting, and water stained and damaged woodwork. The residual damages would have lessend the value of the home, but if he ripped evererything back to the concrete walls and floor, no problem.

update. March 23rd, 2 weeks exactly after my dishwasher exploded, I received an estimate in the mail. I am quite plased at how little depreciation there was. The letter says that a check has been mailed, for the actual value of my loss. The amount of the check is value, minus my deductible. I am thrilled that the adjuster counted *everything*, so I don't have to skimp. Each item is broken down, line by line, and they have accounted for painting my walls that have water damage, and even replacing the insulation in the floors, which I was afraid wouldn't be covered. What I do think is silly, is that the cabinets are being replaced, but not the uppers. My home is a 1978, so the cabinets are old. No chance of matching them, so I'm supposed to have old cabinets on the top, and new on the bottom? A bit silly. We are thinking of replacing the floors ourselves, and are really happy to see that the first check will be enough to cover the materials. It's only $450 or so in depreciation for the floors and cabinets. Not too bad, considering. I still don't understand how I would go about getting the 2nd check for replacement. Do I call and ask? Send them pictures or the completed repair? Have the adjuster come back out and look again?

Come on! You can't read that? Survey made September 22nd 1846 and filed in the Office of the Fire Association for John Hewston of the City of Philadelphia of his three story brick front (frame back) dwelling situated on the East side of Perry Street between Spruce and Pine Street No. 27, as follows: 14 feet front by 16 feet 6 inches deep. First story 1 room floor of heart pine 1 window 20 lights glass 8 by 10 single hung pannel shutters 1 window 12 lights glass 8 by 10 single hung pannel shutters 1 closet, wood mantel, 1 inch pannel doors finished with ovolo mouldings. Winding stair of heart pine. Second story 1 room, box entry, floor of heart pine, 3 windows 12 lights glass 8 by 10 single hung 2 have pannel shutters, 1 closet, wood mantel, 1 inch pannel doors finished with ovolo mouldings. Third story 2 rooms, box entry, floor of heart pine 2 windows 9 lights and 1 12 lights glass 8 by 10 not hung, 1 closet, 1 mantel shelf, 1 inch pannel doors finished with ovolo mouldings. Single pitch roof of cedar, brick eave, tin gutter, trap door. Cellar kitchen, floor of heart pine 1 window 9 lights glass 8 by 10 not hung pannel shutters, 3 closets, mantel shelf, 9 light sash doorfront. Winding stairs (outside) to yard and 2 steps and platform at back door. Shed 7 feet by 14 feet 8 feet high. Floor under shed heart pine. Joseph Hutchinson Surveyor This post was edited by KevinMP on Tue, Jan 29, 13 at 22:27

When I asked my agent he said I shouldn't have said anything to the insurance company and that they would have been none the wiser. I think if you intentionally lie to your insurance company about a vacant house and you need to make a claim and they could show that you basically lied, then they may be able to deny the claim. But if the 'error' was done by your insurance agent (ie. he should have realized it was vacant and advised you that you needed to change your policy) and you needed to make a claim, they'd probably have to honour it. It was their employee's fault. Some agents may unintentionally do this or maybe even be willing to take whatever slap on the wrist might happen if their 'error' is noticed in order to keep their clients happy. So that's probably why he told you that you shouldn't have mentioned it. Now that you have, he can't claim that it was an oversight on his part so you'll have to change your policy. But that's just my opinion. That may not be the case and maybe your agent made a huge blunder that could have cost you if something had occurred. Insurance companies like to make people think that claims can be denied for the tiniest infractions and they will deny legitimate claims all the time because if even a fraction of the claimants give up and go away, that's money in their pocket. If you fight the denial then the worse case is that they have to pay it. Why would they jump to that position right away? They aren't your friend.