Extended Replacement Cost
Definition:
Coverage that pays to rebuild a home even if repair costs exceed the policy limit, up to a set percentage.
Explanation:
This endorsement provides extra protection against construction cost inflation. It’s often set at 10–25% above the dwelling limit.
Example:
If your home is insured for $400,000 but rebuilding costs $440,000 after a fire, extended replacement cost may cover the extra $40,000.
Why it matters:
This term affects how claims are handled and what payout a homeowner may receive.