Extended Replacement Cost in Homeowners Insurance

white rounded stones stacked on water
Extended Replacement Cost in Homeowners Insurance

On some home insurance policies, you may see 25% Extended Replacement Cost listed on your declaration page.  This extended replacement cost gives you extra coverage for your house if it is completely destroyed and needs to be rebuilt from the ground up. It modifies Coverage A: Dwelling in your home insurance policy. Let's look at an example:

Your home is completely destroyed in a fire that wipes out the whole neighborhood.

Home Replacement Cost: $300,000
Coverage A: $300,000
25% Extended Replacement Cost: Included

Because the whole neighborhood is looking for engineers, builders, and contractors, it actually ends up costing you a bit more than $300,000 to rebuild your home. You submit estimates/receipts for $350,000 to your insurance company. Since you had the 25% Extended Replacement Cost, they cover the entire $350,000 in rebuilding costs (minus your deductible).

In the above example, this 25% extended replacement cost addon ended up covering that extra $50,000 in unforeseen charges. In most cases, adding the extended replacement cost to your policy isn't too expensive. Most homeowners will pay $5-$20 per month, but get the piece of mind knowing you have some cushion if the worst does happen. 

not bad denzel GIF

There are other levels of extended replacement cost as well. If you had $300,000 in Coverage A, then:

  • 25% Extended Replacement Cost = $75,000 in extra Coverage A
  • 50% Extended Replacement Cost = $150,000 in extra Coverage A
  • 75% Extended Replacement Cost = $225,000 in extra Coverage A
  • 100% Extended Replacement Cost = $300,000 in extra Coverage A
  • Guaranteed Replacement Cost = unlimited extra Coverage A

Hope that helps!

At your service,
Young Alfred