Did you know that not all homeowner policies are created equal? One of the most important elements of your homeowner’s policy is how much money you will get to rebuild your home after a loss. The dwelling amount on your policy, or coverage A, is how much money the insurance company calculates it will take to rebuild your home, but do you know if you will get all of it? What if it costs more than what Is stated on your policy?
Types of Valuations:
Actual Cash Value (ACV): If you see actual cash value on your homeowners policy, run and call us as quick as you can! Actual cash value is not ideal for 99% of homeowners, as it provides very little coverage in terms of paying you to rebuild your home. Your car insurance is written on ACV which is why you get paid in proportion to the year of your car, the miles, and condition. If your home was built in 1995, you don’t want to be paid 27 years of deprecation after a fire, you want a new home.
Replacement Cost (RC): This is the most common valuation used for most homeowner policies today. On your policies Declarations page, you will find the “Dwelling Amount” or “Coverage A”. This is the amount that the insurance company calculates it will cost to rebuild your home in current market conditions. If your house would burn to the ground, you would receive up to the amount stated on the Declarations page to rebuild your home. In most cases this will be sufficient, but does not take into consideration any renovations or additions you have done. It also does not take into consideration extreme inflation (like we are seeing in 2022), or an increase in labor or material costs. If your home is covered for $300,000 but after the fire it ends up costing $305,000, you will be responsible to cover the additional costs, in this case $5,000.
Extended Replacement Cost (ERC): As the name suggests, ERC is similar to RC but provides an extra level of protection from some of the examples stated above. Extended Replacement Cost provides an additional percentage of coverage above the stated Replacement cost. For example, your policy is written with $300,000 of Coverage A, with 15% Extended Replacement Cost. The 15% of $300,000 provides an extra $45,000 of coverage in the event of a loss. The “extended” $345,000 of coverage is a nice protection against renovations that you don’t tell your insurance company about, or inflation.
Guaranteed Replacement Cost (GRC):Erie insurance writes most of its new Homeowner policies with Guaranteed Replacement Cost. GRC is the best coverage available today to protect your home. Unlike the other types of valuations, Erie Guaranteed Replacement Cost, does not limit the customer to a specific amount that will be paid out in the event of a fire or a total loss. The Replacement Cost is still calculated and can be found under the Dwelling amount on the Declarations page, but you are not limited to that number. This is a HUGE deal and provides peace of mind for its customers when it comes to renovations, inflation, costs of materials, or any other market volatility. For example, you have a Guaranteed Replacement Cost policy with a Dwelling amount of $300,000. You just finished updating your kitchen and 2 bathrooms which cost you $50,000. The day after the contractors finish, your house burns to the ground. You did not have time to inform your insurance company of the renovations and you are praying that you have enough coverage. With Guaranteed Replacement Cost Erie insurance would pay the additional $50,000 to rebuild your home to its condition pre-fire.
If you had been with a different company, and had Replacement Cost, the additional $50,000 would be on you as the homeowner to cover.
Erie Guaranteed Replacement Cost Testimonial:
In July of 2020 one of our customers had a generator malfunction and burn their house down. Here is a link to the article: Mount Gretna Home Destroyed By Fire.
The customer had an Erie Insurance Guaranteed Replacement Cost homeowners policy. Fortunately, no one was injured in the fire but the home was completely destroyed. Over the next few months, the family began to put their lives back together, the rubble was removed, and plans to rebuild the house began.
Just as they were about to begin rebuilding the home, lumber prices skyrocketed, and due to Covid-19 labor was more expensive and harder to find. With the inflated prices the actual cost to rebuild the home was about $100,000 more expensive than what was stated on their policy under the Dwelling Coverage. Luckily for this family they had Guaranteed Replacement Cost. Erie insurance covered the difference and built them a brand-new home. The homeowner was ecstatic with Erie’s level of service and coverage throughout the whole process. Their new home is rebuilt and they are moved back in.
We recommend reviewing your policy and checking what coverages you have. We would be happy to perform a free review of your policy and make sure you have adequate coverage on your home. Reach out to us at info@susquehannains.com or call us at 717-290-7780