What Is Guaranteed Replacement Cost Insurance?

Guaranteed replacement cost (GRC) insurance is a homeow🧸ners insurance coverage option that pays to rebuild your home exactly as it was before a loss, even if the cost exceeds policy limits. 

However, this insurance comes with many caveats, can vary by state, and is typically more expensive than standard homeowners insurance. Not every home qualifies for this coverage, and not all insurance companies offer guaranteed replacement cost insura✅nce. 

How Guaranteed Replacement Cost Insurance Works

Guaranteed replacement cost is an endorsement you add to your homeowners insurance. You pay an additional premium for the endorsement, which ensures you can cover all costs a builder, architect, or other professional charges to rebuild your home or repair dama🦋ged sectio🗹ns. 

When you buy g🍌uaranteed replacement coverage, the insurer typically sends a representative to appraise your home in person. The representative will seek to understand your home’s features and estimate the replacement cost.  

There are a few reasons a standard homeowners insurance policy might not cover the full cost of rebuilding your home. Rebuilding ꦿcosts vary by location, driven in part by the price of labor and materials. If 𒁏costs spike for builders and materials—such as after a natural disaster impacts your entire community—a policy with set coverage limits may not pay enough to repair the damage. 

You’ll still have to pay your deductible. For example, if your home burns🉐 down, costs $32ꦍ0,000 to replace, and your deductible is $10,000, you’ll pay $10,000 out of pocket while your insurer covers $310,000.

If you successfully get a policy with guaranteed replacement cost coverage, you must tell your 澳洲幸运5开奖号码历史查询:homeowners insurance company about any i💖mprovements you make. These improvements could include additions, increas💎ed square footage, or other alterations that would increase the cost of rebuilding or replacing your home.

Guaranteed Replacement Cost Considerations

Although many insurers🐠 say a GRC policy will cover your losses and rebuild your home, read the exclusions carefully. The fine print may include:

• Varying coverage and limits: Coverage amounts and limits vary by state and situation.
• Insurer-set replacement costs: The insurer sets its estimated replacement cost limit and can increase that cost in the future due to inflation or other factors.
• Land and other buildings: Some policies cover other structures on the property, like garages. Many don’t cover land.
• Code updates: GRC policies may cover rebuilding costs to meet modern-day 澳洲幸运5开奖号码历史查询:building ordinances, including permits, but check your policy to be sure. Some insurers may offer this coverage as a separate building code endorsement.

Qualifications for Guaranteed Replacement Cost

Only some homes will qualify for GRC insurance. For example,๊ your home may not be eligible if it: 

• Is older than a standard insurer is willing to cover
• Has roofing made of specific materials over a certain age—for example, a wood roof over 12 years old
• Has unrepaired property damage 
• Has asbestos roofing or siding 
• Is abandoned, vacant, or condemned

Alternatives to Guaranteed Replacement Cost

Some insurers may say they offer guaranteed replacement cost coverage but actually offer extended replacement coverage (ERC) in the event of a total loss. Rather than paying the full amount to rebuild your home to the w🍃ay it was ܫbefore, this coverage will pay out a limited percentage over your policy’s dwelling coverage limit, such as 25% or 50%. After you reach this predetermined amount, the insurer pays no more.  

The use of these terms can vary by state, which can be confusing. For example, Utah’s state insurance website says, “Most companies limit the guaranteed replacement cost to 125%.” The Oklahoma Insurance Department says, “A guaranteed replacement cost policy pays whatever it costs to rebuild the home as it was before the disaster, regardless of the policy limit.” New York “does not provide one definitive definition of the term and, in practice, insurers may ‘cap’ their liability under such a clause by including additional provisions in the insurance policy.” Be sure to double-cheꦗck the limits of your policy. 

True GRC coverage is less common than extended replacement coverage. However, both opt🧸ions will provide better rebuilding coverage than a policy that only pays up to the stated lꦬimit. As an example, imagine you own a house insured for $1 million. It’s destroyed in a fire, and it will cost $1.5 million to build. Here’s how different levels of coverage will pay out.

Who Should🌜 Consider💝 Guaranteed Replacement Cost Insurance?

Guaranteed replacement cost insurance is best for those with homes ♓that would be cosꩲtly to replace, which could be because:

• They are expensive to begin with
• They are made of hard-to-replace materials or contain features that would be difficult to recreate
• The cost of labor and materials is rising quickly

Some rebuilding cost factors aܫre out of your control, including post-disaster pricing. But if you live in a home with bespoke, custom, or historic features, y⛦ou may want to consider guaranteed replacement cost coverage.

Which Companies Offer Guaranteed Replacꦗement Cost?

The following companies offer g🅘uaranteed replacement cost coverage, but remember that the availability of this coverage varies✨ by state and home. 

• AIG Private Client Select
• American Modern Property and Casualty
• Berkley One
• Country Financial
• Erie Insurance
• Farmers
• Foremost Insurance
• MAPFRE’s Premier Living
• Nationwide Private Client
• Plymouth Rock
• PURE Insurance
• USAA

Frequently Asked Questions (FAQs)

The Bottom Line

If you have a high-value, historic, or otherwise hard-to-replace home, paying extra for guaranteed replacement cost insurance can ensure that it can be fully restored in the event of a loss. However, this coverage may not be available in every state, and not every home qualifies. As an alternative, consider more common (but more limited) extende🐟d replacement cost policies.