Insurance pays rent?

[Pandu Chimata]

Hello everyone! I hope you are doing good and safe! 

I have received an inquiry for my furnished rental house through an agent. The agent says the tenant's house was damaged due to fire and it's covered by insurance. They are looking for a year rental for a furnished house. I was just wondering how this works out with the insurance. 

If the insurance is paying the rent, would they pay directly to the homeowner or they pay to the policyholder and policyholder pays to the owner? 

If the homeowner directly gets from the insurance, does insurance negotiate the price? and/or how do we know, how much is their limit? 

In this situation, does the renter need to take rental insurance if they like to, or is it already covered since the rent is paid by the insurance?

Have anyone dealt with such scenarios? Please advise.