No matter how careful you and your insurer are when appraising your home, it is possible to underestimate the replacement cost of the building. The Guaranteed replacement cost option protects you from being under-assessed, and will make up for any difference in the replacement value, or will provide you with added compensation up to an agreed amount. This coverage is for homeowners only.
Guaranteed Replacement Cost coverage on homeowners insurance means that your home will be repaired to its value at the time of loss, reguardless of the amount of coverage carried. For example, you estimate your home to have a full replacement value of $162,000. On your homeowner policy, you carry $162,000 coverage for the structure. If you have guaranteed replacement cost endorsement on your policy and the home is lost in a fire and the house costs $168,000 to rebuild, the policy will pay $168,000.