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Extended Replacement Cost in Homeowners Insurance

On some home insurance policies, you may see a 25% Extended Replacement Cost listed on your declaration page.  This extended replacement cost gives you extra coverage for your house if you exceed your Coverage A: Dwelling limit 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 add-on ends up covering the 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 peace of mind knowing you have some cushion if the worst does happen. 

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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