Extended Replacement Cost is an important and valued feature of a Homeowner Policy. Introduced by the Industry in the 1980's, the intent of the Endorsement is to provide a cushion of extra Dwelling Coverage. We know that the cost to rebuild is not known until you have to repair or replace your home following a loss. This is the worst time to find that your Dwelling Coverage is insufficient to finish the job.
Replacement Cost Estimates are just that, Estimates. And Replacement Cost Estimates are only as good as the information used in the estimating program. If outdated or inaccurate data is used in calculating Replacement Cost, that can add to the potential inadequacy of your Dwelling Limit.
Many don't realize that in order for the extension of Dwelling Coverage to apply, you must comply with three requirements:
1. Insured your Home to 100% of its estimated Replacement Value as determined by the carrier to begin with.
2. Accept the annual Inflation Guard Adjustment that is implemented by the carrier at renewal.
3. Inform the carrier of any Alterations or Improvements that exceed $5,000.
If you fail to comply with any of the above requirements, insurers have the right to decline providing the Extended Replacement Cost additional protection.
It's important to report improvements, remodels, additions and alterations to your agent, so that you do not find yourself participating in the cost of repairs after a claim.
If you've buffed out your home recently, let us know so we can make sure you are in compliance with the most common requirement, #3!