To truly protect themselves, extended replacement coverage (or better yet Guaranteed Replacement Cost) is essential. This form of coverage provides a benefit over and above the policy limits for replacing a damaged house. That means, should a covered loss occur, extended replacement coverage will kick in and pay up to a specified percentage over an insured’s policy limit—sometimes as much as 125 percent.
As an example, let’s say your $270,000 home is destroyed by a storm. Because this disaster affected an entire neighborhood, the costs of building materials and labor significantly increased due to high demand. As a result, the replacement value is estimated at $300,000—significantly over the normal replacement cost covered by standard homeowner’s policies. Without extended replacement coverage, you would likely have to pay the extra $30,000 out of pocket.
When considering homeowners insurance, extended replacement coverage is critical. While skimping on this protection may lower your coverage costs slightly, those savings will mean nothing should disaster strike and lead to tens of thousands of dollars in losses that will be required from your pocket.
Homeowners insurance can be complicated, and it’s important to discuss your unique needs with an expert like an Independent Insurance Agent. To secure a policy that’s right for you, contact us today at Applegate Insurance Agency 865-240-2348.