Time to learn about Extended Dwelling Coverage!
The Coverage A section of your home insurance policy, known as Dwelling Coverage, protects against direct physical damage caused to the dwelling, including bathrooms, fireplaces, flooring and all structures that are attached to the dwelling on the same foundation (such as a garage, deck & porch).
Most insurance companies have a means of calculating the Dwelling Coverage for a home by taking into account specific building characteristics like total living area square footage, what type of garage, how many fireplaces, and so on. Because the calculation of a home’s dwelling coverage is not an exact science, most insurance companies offer an endorsement called “Extended” or “Guaranteed” Replacement Cost.
Extended dwelling coverage is an additional amount of insurance allotted by the insurance company to compensate for a total loss that exceeds the dwelling coverage that’s listed on the insurance policy. For example, if an insured has $100,000 in dwelling coverage & the policy provides extended dwelling coverage of an additional 25%, the maximum amount the insurance company will pay out in the event of a total loss is $125,000. This provides an additional “padding” of coverage in case the home costs more to re-build than $100,000.
One thing to note about this endorsement, you can’t use it to underinsure your home. Based off the example above, you can’t insure your home for $80,000 & add the Extended Replacement Cost endorsement. All insurance companies require an insured to insure to value.