Your home might be left severely damaged or totally destroyed following countless natural disasters and other hazards—fires, tornadoes, catastrophic thunderstorms and more. That’s why it’s essential to have appropriate homeowners insurance that’s ready to protect you in these situations. If you don’t, then the costs of rebuild and repairs can be an overwhelming expense.
While you hope that your standard insurance limits will help you, there are some limitations that will often impact how much compensation you might receive for a claim. Therefore, you might want to consider investing in extended replacement coverage. This can be a big help in the face of high-value losses on your property.
Understanding The Limits of Homeowners Insurance
When purchasing coverage for their home, policyholders often make the mistake of simply insuring it for the resale value. However, the cost of buying or selling the home is not the same as the amount of money that it might cost to rebuild or repair the actual dwelling.
Should a flood, storm or other event occur, a homeowner insured at resale value may find that the cost to rebuild far exceeds the original purchase price. This discrepancy can occur for a variety of reasons, including inflated construction costs following catastrophic events that impact multiple homes in a particular area.
To truly protect themselves, a homeowner might find that extended replacement coverage is essential. This form of coverage provides a benefit over and above the policy limits for replacing a damaged house.
Why Extended Replacement Cost Coverage Can Help You
If you have extended replacement cost coverage on your homeowners insurance, then should a covered loss occur, your benefits will kick in and pay up to a specified percentage over an insured’s policy limit—sometimes as much as 125 percent.
For example, let’s say your $270,000 home is destroyed by a tornado. Because this disaster affected an entire neighborhood, the costs of building materials and labor significantly increased due to high demand.
As a result, the replacement value is estimated at $300,000—significantly over the normal replacement cost covered by standard homeowner’s policies. Without extended replacement coverage, you would likely have to pay the extra $30,000 out of pocket. It’s far and away better to have this cost covered by your insurance, instead.
When shopping for homeowners insurance, extended replacement coverage is critical. While skimping on this protection may lower your coverage costs slightly, those savings will mean nothing should disaster strike and lead to tens of thousands of dollars in losses.
Homeowners insurance can be complicated, and it’s important to discuss your unique needs with an expert. That’s why the agents at Amco Insurance are here to help you through the processes of both optimizing your policy and keeping those benefits affordable. Just contact us today to learn more about the essential benefits that extended replacement cost coverage can provide.