Life is unpredictable and disaster can strike at any moment. Insurance provides you with peace of mind knowing that if something unexpected happens, you’re going to be okay. You won’t face financial ruin. Determining how much it would cost you to rebuild your home can be a giant headache.

What is Guaranteed Replacement Cost?

Guaranteed Replacement Cost ensures that no matter how much it costs to rebuild your home in the event of a claim, your insurance policy will cover you.

Why should I buy Guaranteed Replacement Cost coverage?

For many people, buying a home will be the biggest investment of their lifetime. So, it makes sense that they’d want to do everything in their power to protect that investment. It’s actually not uncommon to think that protecting your home with enough insurance coverage costs more than the home itself. The reality is that the insurance company is not insuring your home with the idea of buying it from you. Rather, the goal is to insure your home with enough coverage in case an unforeseen event happens. So, instead of thinking about what you paid to purchase your home, think “How much would it cost if a builder needed to completely rebuild my home?”

The most important thing to remember about guaranteed replacement cost is that this coverage gives you peace of mind, knowing that no matter how bad the damage to your home is, even if you have to rebuild from the ground up, your insurance will cover you.

As a Homeowner, Do I Have Choices as to What Coverages I Want?

Yes. In the insurance business, Guaranteed Replacement Cost is only one option you have for coverage as a homeowner. Listed below, you will find a detailed breakdown of some of the differences between these coverage options.

Replacement Cost vs. Guaranteed Replacement Cost

Guaranteed Replacement Cost offers something that the other coverages do not: peace of mind. This means that no matter how severe the damage to your home is, your policy will cover you. Period. Replacement cost is a little different in that it has a specific limit of coverage. This coverage amount is listed on your policy’s declarations page. Your insurance company will not exceed that dollar amount. This is why, as a homeowner, it’s essential that you are comfortable with the amount of coverage you choose to have on your homeowners insurance policy. If you do not have Guaranteed Replacement Cost, you will likely be responsible for paying the remaining balance out of your own pocket.

Example: Let’s say your home is insured at a replacement cost value of $350,000. In reality, it’s going to cost $400,000 to rebuild your home back to its original state before the loss occurred. You must find a way to pay the extra $50,000 or accept the realization that your newly-built home will not be the same as the one you had before.

Extended Replacement Cost vs. Guaranteed Replacement Cost

Again, Guaranteed Replacement Cost is going to give you the most coverage out of all of these options. Extended Replacement Cost basically gives you a little bit of extra wiggle room with regards to your loss.

If you have this coverage with Erie Insurance, that added protection sums up to 25% more than the listed dwelling amount as seen on your policy’s declarations page. For example, let’s say your home is valued at $600,000. With this particular coverage, your policy will give you an additional $150,000 to put towards replacing your home. As stated earlier, if it is determined that the costs to rebuild your home are exhausted before it restored back to its original state, you will be responsible for the remaining costs, whatever they may be. In the cases of a natural disaster, it is, oftentimes, determined that this coverage is not sufficient enough to cover the full cost of restoration. Guaranteed Replacement Cost is your best option in these cases.

Guaranteed Replacement Cost vs. Actual Cash Value

Actual Cash Value is typically going to be your least expensive option. However, it is commonly known and understood that the less something costs, the less value it has. This means that if you buy something cheap, expect less in return.

Actual Cash Value is a coverage that is for a pre-determined amount. No more. In addition, some insurance policies may factor in depreciation. For example, in cases where a home has an aging roof, you very well may end up with less money than your policy indicates. That’s definitely a tough situation to be in.

Guaranteed Replacement Cost versus Actual Cash Value is simply a case of most coverage vs. least coverage. Also, Actual Cash Value leaves you most at risk of having to pay out of pocket in the case of a catastrophic claim.

It is very important to remember that Erie Insurance does not offer Actual Cash Value for the dwelling on your primary home. This coverage is only available for secondary homes like vacation homes.

In short, Guaranteed Replacement Cost is always going to be your best option when choosing how to insure your home. No matter what happens, you will be covered!