The Truth About Homeowner Extended Replacement Cost
Posted by Risk Concepts Insurance Brokers on
Extended replacement cost is intended to insure the homeowner in the event that their home needs to be replaced and that the replacement exceeds the home’s insured value, often by about 10 to 15 percent of the home’s value. This is intended to protect the homeowner in the event that, for some reason, the home is more expensive to replace than its insured value actually was. This can happen for a variety of reasons. However, homeowners should not allow their insurance policy to undervalue their home because they believe the extended replacement cost will kick in.
Though the extended replacement cost is useful for homeowners it will only cover 10 percent to 15 percent on top of the home’s true appraised value. This means that if the home was truly valued at more than what it was insured for the extended replacement cost amount and insurance payment will only be covering the insured value, not the cost that it will actually take to rebuild the home. Homeowners should always keep their insurance policies updated with the true value of their property for this reason.