Homeowners Insurance Policy Options: Replacement Cost Coverage

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Questions and Answers

What is the primary purpose of guaranteed replacement cost coverage in homeowners policies?

To ensure the rebuilding of the home exactly as it was, regardless of the actual cost (correct)
To reduce the policyholder's premium payments
To provide additional coverage for personal property
To limit the policyholder's liability in case of a loss

What is the typical limitation of extended replacement cost coverage?

It only applies to the dwelling (correct)
It only applies to personal property
It provides limitless coverage for any type of loss
It is limited to 10% of the policy limit

What is the requirement for guaranteed replacement cost coverage to apply?

The policyholder must have a minimum deductible of $1,000
The policyholder must have a separate policy for personal property
The policyholder must have a flood insurance policy
The policyholder must allow the insurer to set and approve the amount of replacement cost coverage (correct)

Why is guaranteed replacement cost coverage rare today?

Many insurers were figuratively and literally burned by their guarantees of limitless insurance during the early 1990s (D) Signup and view all the answers

What is the typical range of additional coverage provided by extended replacement cost coverage?

25% to 50% of the policy limit (D) Signup and view all the answers

What is the main difference between guaranteed replacement cost and extended replacement cost coverage?

Guaranteed replacement cost provides limitless coverage, while extended replacement cost provides limited coverage up to a certain amount (D) Signup and view all the answers

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