What does guaranteed replacement cost cover on your home?

For a homeowner, it is important to be properly insured, which means you have enough coverage to rebuild your home if you are ever in that unfortunate situation. You might think you could check how much your home would sell for and use that number. However, the amount your home would be worth to sell is different than what it would cost to rebuild.

And even if it appears you have enough coverage, there are times when the cost to rebuild is more than expected due to inflation, labor costs, lumber costs, supply chain shortages, and more. This is where guaranteed replacement cost comes in.

What is guaranteed replacement cost?

Guaranteed replacement cost is an optional coverage that can be added to a homeowners policy. If a covered loss is greater than the Coverage A - Dwelling Limit, the endorsement will pay the full cost to repair or rebuild your home—even if it costs more than you are insured for. Other insurance companies may put a limit on how far over you can be (often 15–25%), but Acuity does not have a limit for our guaranteed replacement cost endorsement!

What are the benefits of guaranteed replacement cost?

The key benefit of adding guaranteed replacement cost to your home insurance policy is peace of mind. You will know that in the event of a disaster, your home is fully covered and will be rebuilt. You don’t need to worry about rising construction costs, labor prices, or inflation. This helps you avoid unexpected out-of-pocket expenses, as you only need to pay your deductible, and we handle the rest.

What is an example of guaranteed replacement cost coverage in action?

Let’s say there is an electrical fire in your home while you are away, and it burns to the ground. You have a $1,000 deductible and your insurance policy has your home insured at $250,000. Unfortunately, due to inflation and rising construction costs, the rebuild is going to cost $320,000. If you didn’t have guaranteed replacement cost, you would be on the hook for $69,000. Cost of rebuild ($320,000) - home insurance limit ($250,000) - deductible ($1,000). With Acuity’s guaranteed replacement cost, you would only be on the hook for the $1,000 deductible.

How do I add guaranteed replacement cost to my homeowners insurance policy?

To add this coverage to your existing policy, you can contact your independent insurance agent and ask about updating your policy. This could be a great time to complete your annual insurance review as well.

As always, you need to continuatlly review and update your policy annually to ensure the proper limits are in place. If you do not have an Acuity home insurance policy, you can get an online quote and add the guaranteed replacement cost endorsement during the quoting process!