Guaranteed Replacement

What Is Guaranteed Replacement Cost in a Home Policy?

A home insurance policy protects one of your most valuable assets against damages and loss. You want coverage that will meet your needs in the event of a total loss of your home. Research into policy limit valuation methods shows that guaranteed replacement cost coverage can offer protection that others do not.

Valuation Options in a Home Insurance Policy

Full replacement cost is the most common method used for valuing home policies. It compiles an estimate to replace your home and then bases the policy limit based on that figure. However, if construction prices rise, you may not have enough coverage to rebuild. Extended replacement cost can offer a cushion to soften the effects of inaccurate estimates. It provides extra coverage up to a certain percentage of the original limits. Guaranteed replacement cost coverage provides the most comprehensive protection. It will cover the actual costs incurred during a rebuild, regardless of how much they exceed original estimates.

Reasons to Choose Guaranteed Replacement Cost Coverage

Many people base their policy limits on mortgage balances, which may be insufficient in the event of a significant loss. When you use guaranteed replacement cost to set limits, however, you know that final costs will be covered. It also removes the threat of price spikes. If your home is in an area that is prone to disasters like hurricanes or wildfires, then it makes sense to have the extra protection this coverage offers.

Work with an agent who understands construction costs as well as home values to ensure your home is protected.