Why It’s Essential to Have the Right Replacement Cost Coverage for Your Home, Condo Association, or Apartment Building

Why It’s Essential to Have the Right Replacement Cost Coverage for Your Home, Condo Association, or Apartment Building

Whether you’re a homeowner, a trustee of a condominium association, or the landlord of an apartment building, one of your most important duties is taking good care of the property you’re responsible for. This obligation goes well beyond making sure the landscaping is maintained, necessary repairs are performed, and the building is up to code. If a catastrophe, such as a fire or hurricane, were to strike your home, condominium, or apartment building, you need to do everything you can to make sure it is rebuilt as quickly as possible. Guaranteed replacement cost is an insurance endorsement that can help give you the peace of mind that your building will be put back to its pre-disaster condition and you can fulfill your responsibilities to the people you may be accountable to, like condo owners and tenants.

What Type of Replacement Cost Coverage Does Your Insurance Policy Include Now?

It’s possible you already have the guaranteed replacement cost coverage endorsement in your homeowners, master condo association, or commercial property insurance policy. However, there are several other types of replacement cost coverage that you could have selected, including basic and extended replacement cost.

To make sure you have the right level of coverage for your specific property, it is essential to figure out what replacement cost you have in place now. The easiest way to find this out is to ask your local insurance professional, like Gilbert Insurance. We can quickly review your current policy and let you know what type of coverage you have. More importantly, we can give you a primer on what having this replacement coverage means for you and your property, especially if a catastrophe were to hit.

Until you have a chance to give us a call, though, the following information is an overview of the three types of replacement cost coverage and what each may provide financially at the time of a loss.

  • With standard replacement cost coverage, you typically get help paying for the cost to rebuild or repair your home or your condo or apartment building with materials of similar quality and without being penalized for depreciation due to factors such as age. However, this type of coverage is subject to limits, which means your insurance company will reimburse construction costs only up to a specific dollar amount.
  • With extended replacement cost coverage, you usually get help paying for the cost to rebuild or repair your property, even if the expenses extend beyond your policy’s coverage limits. While an extended replacement cost endorsement may provide you with as much as 25% to 50% more coverage, it’s important to understand that there will still be a limit to how much your insurance company is willing to pay for reconstruction expenses.
  • With guaranteed replacement cost coverage, your insurance carrier generally increases the coverage limit on your home insurance, master condo association, or commercial property insurance policy to allow for whatever labor and materials are required to get your building back to the same condition it was in pre-disaster, regardless of the cost.

At Gilbert, we think of the guaranteed replacement cost endorsement as assurance for our homeowners, condo association trustees, and apartment building owners that their building is not going to be underinsured at the time of a serious claim. We also thought perhaps some real-life claims scenarios might illustrate the substantial financial benefit of having this endorsement even further.

The Financial Benefit of Having Guaranteed Replacement Cost
    Claims Scenario #1:
    A Category 3 hurricane strikes the coast of Massachusetts, causing devastating losses to thousands of homes and businesses, including yours. Now, you’re competing with numerous other property owners for building materials and labor, driving the costs of construction to staggeringly high prices.
    Claims Scenario #2:
    An electrical fire quickly spreads through your building, resulting in considerable damage. Now, you’re trying to quickly rebuild but are shocked to find that the price of raw materials that you need for repairs, such as lumber, steel, and plumbing fixtures and fittings, has risen dramatically over the past several months.

    In both of these claims scenarios, if you have either a standard or extended replacement cost insurance policy, it is very likely that you could hit the coverage limits established by your insurance company before you are even remotely close to getting your building back to the condition it was in prior to a storm, fire, or other similar extreme event. Once you max out your policy limits, the financial responsibility of completing the reconstruction would then fall squarely on your shoulders as the homeowner, condo trustee, or apartment building owner.

    With guaranteed replacement cost coverage, however, you have a built-in safety net for times like these. No matter how high your construction costs get, you can be confident that the rebuild will be covered.

With severe weather events occurring with more frequency and intensity in our area, and construction costs continuing to be highly unpredictable, it is more important than ever for homeowners, condo association trustees, and apartment building owners to make sure they have guaranteed replacement cost coverage in case there is an unexpected and significant loss.

Find out more about Guaranteed Replacement Cost Coverage from Gilbert Insurance

Whether you’re a current Gilbert client or just interested in the value of having guaranteed replacement cost coverage, we encourage you to contact us so we can review your policy details. You might be surprised to find that you already have guaranteed replacement coverage. However, if you don’t have this endorsement, our professionals will be happy to walk you through the requirements for eligibility, the cost of this endorsement, any exclusions that you need to be aware of, and several other important details.

The following are a few general things you might want to know about this coverage if you’re considering it.

  • Eligibility. One important qualification for guaranteed replacement cost coverage is that your house or your condo or apartment building must be insured for 100% of its estimated replacement cost value.
  • Exclusions. Even if your insurance policy includes the guaranteed replacement cost endorsement, your insurance company may not agree to cover an entire rebuild of your home or your condo or apartment building if the cost of improvements that you’ve made—either over a period of time or in one big renovation project—is more than 10% of the estimated replacement cost value. This highlights the critical importance of letting your insurance professional know about any updates or additions you’re planning to make so your replacement cost can be reevaluated.
  • Expense. Guaranteed replacement cost is, in fact, very affordable, especially when you consider the level of peace of mind it provides. Many times, this endorsement is available in a bundle with several other valuable coverages in one affordable package, called a broadening endorsement.

The team at Gilbert Insurance is here to answer any additional questions you have related to guaranteed replacement cost coverage and to assist you with the simple process of adding this endorsement to your homeowners, master condo, or commercial property insurance coverage. As your local insurance professional, we are committed to offering you knowledgeable advice and working with you to design insurance policies that fit your specific needs and budget. Speak with a member of our team today by calling (781) 942-2225.