When disaster strikes, be it a hurricane, tornado or fire, one of the first things you look to is your homeowners insurance policy. Once you call your agent or dig out your policy, you suddenly start paying very close attention to your coverages. If your home was substantially damaged or destroyed, you want to make sure that the insurance company pays to rebuild your home. Are you properly covered? Maybe. Did your policy have guaranteed dwelling replacement cost, or expanded replacement cost? What’s the difference? Plenty! Expanded replacement cost means the insurance company will pay a certain percentage above the amount of your current coverage.
For example, if your home is insured for $250,000 and you have expanded replacement cost of 25%, the total limit your company would pay would be $312,500. That’s fine as long as your home can be rebuilt for that amount. Guaranteed dwelling replacement cost coverage will replace your home for any amount above your current coverage. In the same example, if your home is insured for $250,000 and you had guaranteed dwelling replacement, your insurance company would pay any amount to rebuild your home. Guaranteed dwelling replacement has no caps.
Many people purchase homeowners insurance without paying close attention to coverages. Unfortunately, there are situations where the amount of coverage is inadequate. Even though the current economic situation has reduced the values of homes, rebuilding costs continue to be high, because a lot of building materials are petroleum-based. Every homeowner should check their insurance coverage annually, and make sure that the amount of coverage is correct. Ask your agent if he or she represents a company that offers guaranteed dwelling coverage, one word can make a difference!