Most home insurance policies are built around a value limit, one that is meant to reflect the cost of the property and belongings within it. Much of the time, that estimate is a “best guess” between the owner and insurer, covering both the purchase price and the estimated value of belongings inside. That’s frequently an issue because homeowners regularly purchase expensive assets that might bring their possible damages above the value of the coverage, which is why so many policies have additional riders to cover valuable assets like jewelry or electronics. Similarly, though, there’s often an issue with insuring the replacement value of the home if the property appreciates considerably or if it was purchased below market price. That means an insurance payout might be maximized and still fall short of what you need to rebuild.
Adding Guaranteed Replacement Coverage
Even if your home is insured for its full value, the cost of rebuilding can exceed that value easily if you are determined to rebuild, because sometimes a new structure construction is simply more expensive than purchasing a decades-old but well-maintained property of the same size. For owners with high-value homes and those concerned with the cost of a rebuild on site, the only option that covers the gap is a policy specifically designed with guaranteed replacement cost instead of setting maximum dollar value. It can be folded into a full home owner’s policy or purchased as an additional form of coverage that only addresses the gap between your primary insurance and the actual replacement costs. Either way, it provides the protection you need.