Pays the full cost of replacing or repairing a damaged or destroyed home, even when that amount extends above policy limits.
Designed to protect policyholders after major disaster, when reconstruction expense runs high and homeowners are financially vulnerable, guaranteed or extended replacement cost policies cost more than a standard homeowners policy. However, they usually cover at least 120 percent of the home’s original value—and, in some cases, no percentage limits are imposed. This allows the insured to return home after restoring the abode to pre-damage condition or better.
For homeowners who want to protect what they have without financial worry following disaster, guaranteed or extended replacement cost coverage may prove valuable coverage worth the extra money paid in premiums.