Extended vs. Guaranteed Replacement Coverage: Everything You Need To Know

If your home is destroyed and you are forced to rebuild, will your insurance cover everything? The answer lies in your home insurance coverage. Whether the damage is partially or fully covered will depend if you have extended replacement or guaranteed replacement coverage.

Extended vs. Guaranteed Replacement: The Essentials

When buying their first home, it's typical for most homeowners to focus on the fun aspects like painting the master bedroom a different color or adding an elegant lighting fixture in the backyard.

Often, the last thing they think about is a list of unfortunate events that can happen when least expected like a bad storm or fire. However, those are crucial factors to take into account especially when you're shopping around for home insurance.

Extended Replacement Coverage

Let's say you lose most (if not all) of your home to a disaster like a tornado or fire. When filing for a dwelling coverage claim, you want reimbursement for the money you spent to repair or replace your home.

If you have extended replacement coverage, you are reimbursed for a certain percentage over your policy limit. Typically, this is around 10 to 25 percent. For instance, if you have a dwelling coverage limit of $300,000 and you have an extended replacement coverage,, you can be reimbursed up to $375,000.

In essence, an extended replacement coverage gives homeowners a bump in coverage to offset any of those expenses they can't plan for. It is crucial to keep in mind that unforeseen factors can be incurred when repairing or replacing your home.

For instance, if a natural disaster occurs, likely, many people in the area may also find themselves with homes that need to be repaired or replaced. This might cause a huge demand and supply shortage. When this happens, building materials and labor costs may also increase significantly.

Since you'll be getting extra protection, expect that you'll spend an additional $25 to $50 annually to boost this coverage. While it can seem like an expense you can do without, nothing is farther from the truth. It's a wise investment, considering you won't need to worry about where to get money when you fall short on cash for repairs or replacement.

Guaranteed Replacement Coverage

If you're looking for the best way to insure your property from the most costly disasters, get a policy with guaranteed replacement coverage. With guaranteed replacement coverage, you are paid the full reconstruction value of your home without factoring coverage amount or depreciation maximums into the claim settlement.

Guaranteed replacement is considered ideal for homes in high-risk areas where labor and construction costs often skyrocket in the wake of natural disasters. If you have a policy with guaranteed replacement cost, you need not worry about being underinsured. You are fully covered regardless of the amount required to rebuild or repair your home.

You also won't have to worry about unexpected spikes in materials, labor, or other reconstruction costs as you will be getting a full insurance payout. While numerous insurance companies offer guaranteed replacement costs, the availability of this type of coverage enhancement can vary from one state to another.

The cost of guaranteed replacement coverage will also vary from one company to another and from location to another location. Those who reside in high-risk areas will likely be charged more for the coverage add-on.


To figure out which of the two options is best for you, do your research and speak with your insurer. Also, don't shy away from asking questions. Know the pros and cons of each before signing on the dotted line.

About the Author

Rachael Harper is the Content Marketing Strategist of Bennett & Porter, a wealth management and insurance firm based in Scottsdale, Arizona. When not writing, she makes use of her time reading books and playing bowling with her family and friends.

Contact Us

 Keller Williams Island Life Real Estate       The Coffey Group Fine Homes International        Florida Suncoast Property Management 

206 Harbor Drive S,                                    1972 Hillview Street,                                              13801 Tamiami Trail Suite A, 

Venice, FL                                                   Sarasota, FL                                                           North Port, FL

34285                                                          34239                                                                    34287

                                                                                                                                                                                                                                                                                          4125 Lakewood Ranch Blvd,

Bradenton, FL


13801 Tamiami Trail Suite A,

North Port, FL