New homeowners often purchase homeowner’s insurance through a lender, which allows their insurance premiums to be included in their mortgage payments. Most lenders have a set amount of home insurance they require to be carried by the homeowner. When homeowners choose to purchase their own homeowner’s insurance policy, separate from the lender, many choose to purchase the minimum amount required. This is mostly in order to reduce their insurance premium costs. While this type of home insurance policy may satisfy lender and state requirements, it is not likely to cover anything close to the cost of rebuilding the home in the event the home is destroyed.
Choosing the right homeowner’s insurance policy is just as important as choosing a home. Without the right coverage, homeowners risk losing much more than their home and property. In the event of a serious fire or disastrous event, adequate replacement cost coverage is necessary to cover the rebuilding of the home. It is important to note that not all home insurance policies automatically include replacement cost coverage. However, it can be added to an existing policy. In general, homeowners need enough coverage to completely rebuild their home from the ground up, regardless of the purchase price of the home.
Guaranteed replacement cost coverage will cover supplies, materials and labor for rebuilding the home to the same specifications as it was originally built. This means that a home originally built in 1912 would be rebuilt using the original materials used in 1912 and the insurance company would hire someone to do the work. There are times however, that the rebuilding of the home costs more than originally thought. Guaranteed replacement cost coverage will cover the entire cost of the home to be rebuilt while allowing for a small percentage over the listed amount. However, many insurance companies do place a cap on the amount of replacement coverage offered. Once the limit is reached on the guaranteed replacement cost coverage, homeowners are left to cover the remainder of cost themselves. This leaves the homeowner with very few options for recovering their home.
This is why the best home insurance policy includes guaranteed replacement cost coverage with no cap. This means that the policy will cover the entire cost of rebuilding the home to the same specifications as the original without a limit on the cost. This type of home insurance policy will ensure that the homeowner is completely covered, even if the total cost of rebuilding the home goes well over the estimated cost.
Guaranteed replacement cost with no cap is the best home insurance policy for homeowners who want to be assured their home will be completely covered in the event it is destroyed.