If, for instance, your neighborhood is whipped by a tornado, destroying several houses, including yours. These damages can affect you and your family financially due to the high cost of repairs and building materials. If you have guaranteed replacement cost insurance, your policy would cover the entire cost of rebuilding your home to the way it was before it was destroyed.
Guaranteed replacement (GRC) insurance is a type of insurance that covers the entire cost of rebuilding a policyholder’s home after the occurrence of a covered event. Even if the repairs to the damages are more than the policy limits, this insurance covers the cost, fully ensuring the home is rebuilt.
However, a standard home insurance policy generally covers only the replacement cost of the home but pays only an amount stated in the insurance policy.
How Guaranteed Replacement Cost Insurance Works
With a home insurance policy, your home is insured for an estimated replacement cost; it does not pay the cost to rebuild your home. In instances where your home gets damaged due to fire, windstorm, or any other covered event, your standard home insurance policy will only pay for repairs and rebuilding up to the agreed limit.
With GRC insurance, the entire cost of rebuilding your home. However, it is the most expensive type of home insurance coverage available to homes. Insurance companies charge more for this coverage because they take on limitless liability costs for rebuilding costs more than your policy limits.
Who Needs Guaranteed Replacement Cost Insurance?
If you want your home to be built completely after a disaster, irrespective of how much it costs, guaranteed replacement cost insurance is a good idea for you. Also, homeowners who live in locations vulnerable to natural disasters and whose property cost exceeds their home insurance policy limit need this insurance. Aside from these, the following are steps to determine whether or not you need this insurance coverage. You may need this insurance if:
- Your home is too expensive to replace.
- There is a high rise in building materials and labor.
- Your home is built with hard-to-replace materials.
However, if your home insurance coverage has covered inflation and rebuilding costs in your area, you may not need this insurance policy.
Who is Eligible for Guaranteed Replacement Cost Insurance?
Unlike the standard home insurance coverage, only a few homes qualify for this insurance coverage. Before purchasing this insurance, it is important to confirm whether or not your home is eligible using the requirements below:
- If your home is older than its standard insurance policy.
- There is no repaired property damage on your home.
- The home is condemned, unoccupied, and deserted.
- If your home roofing is made of certain materials over a certain age, usually over 12 years old.
- If the home has asbestos siding.
In some cases, you may need to purchase a different policy, usually a homeowners policy created for historic homes that were built before the year 1945.
Are Home Upgrades Covered by Guaranteed Replacement Cost Insurance?
Generally, this insurance pays for the rebuilding of homes lost due to natural disasters. It rebuilds homes back to their original state before damage. However, as long as home renovations are reported to your home insurance company, this insurance does cover home upgrades. If your home is destroyed, GRC insurance may cover the cost of upgrades made to your home.
How Much Does Guaranteed Replacement Cost Insurance Cost?
Because the insurance company agrees to repair and rebuild every detail of your home irrespective of cost, GRC insurance costs more than other home insurance options.
Your home qualification and final price depend on your home, your risk, and the insurance company. There is no specific cost for this insurance. However, you will need to contact your insurer or an insurance agent for a price estimate.
Insurance Companies that Offer GRC Insurance
Depending on your state, the availability of this insurance is limited, but several insurance companies offer this coverage. The following are insurance companies that offer GRC insurance:
- American Modern Property and Casualty.
- Country Financial.
- Farmers
- MAPFRE’s Premier Living.
- Plymouth Rock.
- USAA
- AIG Private Client Select.
- Berkley One.
- Erie
- Foremost
- Nationwide Private Client.
- PURE
It is important to check with an insurance agent to make locating these insurance companies much easier.
Differences Between Guaranteed Replacement Cost Insurance and Replacement Cost
Guaranteed replacement cost is an estimation of how much a policyholder will be paid by an insurance company for the replacement of their homes after a loss. Guaranteed replacement cost insurance is a type of insurance where the insurance company guarantees that the entire cost of your home replacement will be covered in the event of a total loss, even if it surpasses your policy limits.
