More protection is always a good thing when it comes to safeguarding your home. With that in mind, today we take a closer look at extended replacement cost, an endorsement that adds another layer of protection to your homeowners insurance.
What Is Extended Replacement Cost?
To understand extended replacement cost, first we have to talk about homeowners insurance.
Your typical homeowners insurance policy includes four different types of protection:
- Coverage for the structure of your home
- Coverage for personal belongings
- Liability protection
- Additional living expenses
The first component on the above list is also known as dwelling coverage and is the part of your policy that helps repair or rebuild your home if it’s damaged by a covered event.
This, of course, is extremely helpful. However, like any other type of insurance, a homeowners policy has limits on the costs it can help cover.
What extended replacement cost does is give you even more dwelling coverage (usually between 10% and 50% more) so that you pay as little money as possible out of pocket should an accident happen.
Why Is Extended Replacement Cost Important?
You could make the case that extended replacement cost is more important than ever, especially if you live in an area like Southern California, where the risk of natural events like wildfires is considered high.
When this type of incident happens, the cost of labor and materials increases because many homes are affected at the same time.
Plus, you have to consider that the world is going through a global inflation/supply chain crisis that is driving up prices everywhere.
The bottom line is that repairing or replacing your home can be pretty expensive, so the extra protection of extended replacement cost can make a big difference.
A Real-Life Example of Extended Replacement Cost
For example, let’s say that your house is destroyed in a wildfire. Luckily, you have homeowners insurance with dwelling coverage of $400,000.
However, contractors estimate that rebuilding your home will cost $480,000.
That’s $80,000 you would have to cover out of pocket — unless you had the foresight to get extended replacement cost.
In this example, if you purchased a 25% extended replacement cost endorsement, now your coverage is $500,000, which is more than enough to cover the costs of rebuilding your home
RF1 Insurance Services: Homeowners Insurance in Southern California
Interested in extended replacement cost? At RF1 Insurance, we work with some of the world’s most trusted insurance companies, including Safeco, Guard, Stillwater, National General Premier, Aegis, and the California FAIR Plan.