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What is extended replacement cost for home insurance?
I’m buying home insurance for the first time as my lender requires it. My mortgage requires that I purchase at least 80% of my home’s replacement cost, but the insurance company is also offering extended replacement cost. What is extended replacement cost in home insurance?
Emily Maracle · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Home insurance and homeownership can be overwhelming, but congratulations!
Extended replacement cost for home insurance is additional coverage to offset any changes in building materials or labor costs should your home need replacement after a loss from a
covered peril
.For example, if your home is insured for $300,000, but building materials and labor costs have increased and the replacement cost of your home is now $325,000, you’d have to pay out of pocket for anything over your policy’s limit.
Extended replacement cost helps offset this by offering 10% to 50% in additional coverage, but it could go up to 125% depending on the company.
If you live in an area that’s developing quickly, you’ll likely benefit from having extended replacement cost. While your insurance premium will be higher, it will likely be less than your out-of-pocket costs should your home be a total loss.
Before deciding on an insurance company, shop around and request quotes from multiple providers. If you want cheap home insurance quotes fast, go to
Jerry
. A licensed broker that offers end-to-end support, the Jerry app gathers affordable quotes and helps you switch plans. View full answer
- Gregory R.
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Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.
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