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Home Replacement Guarantees – Are they really?
By Anthony Bevilacqua

Homeowner Insurance has changed quite a bit over the past several years, especially with regard to an insurance company's duty to rebuild a home that has been damaged or destroyed by fire or other catastrophic event. The home rebuild or replacement guarantee clause, in days past, was a true commitment by the insurer to pay the total cost to rebuild a home even if it resulted in paying out more than the limit of insurance on the policy. Today's policies, however, offer no such open ended guarantee.

The vast majority of homeowner policies limit the insurance company's responsibility for home rebuilding or replacement to a percentage above the dwelling amount shown on the policy. Typically, 20% is the maximum rebuild overrun percentage, while some policies offer up to a 25% overrun. Insurance statistics show almost 70% of the homes in the United States are underinsured by 30%.

Additionally, home rebuilding clauses do not always allow for the owner to select replacement materials that are identical to those that have been damaged or destroyed. Instead, the policy allows the insurance company to substitute materials of "like kind and quality". If you own a historic registered home, period-built home, or unique luxury home, the like kind and quality of material clause can be problematic and could lead to long, arduous claim disputes.

Since the day you purchased your first homeowner insurance policy, have you built an addition onto your home, remodeled or renovated it? If so, you have a bigger problem. Some insurance company home rebuilding clauses, and the 20% or 25% rebuild overrun agreement, are voided completely unless you informed your insurance company or agent that you added that addition or performed that remodeling work!

Avoiding conflicts with your insurance company when you need them most requires open communication. Insurance policies are contracts. The insurance company has a duty to respond according to the terms of the contract provided the policyholder lived up to his duty to inform the insurance company of changes that affect the insurance. When was the last time your insurance professional reviewed your home replacement cost? If you have not had a complete home replacement cost review conducted within the last two years, you are part of the 70% statistic.

Buying homeowner insurance really means buying peace of mind. Take time, seek advice, analyze options, and find a policy that best fits your style.Price is important, but what price peace of mind?

Anthony Bevilacqua, CPCU is President of Anthony & Company, an independent insurance agency with special insurance and risk management services tailored to the needs of the commercial and residential development community. You can reach Mr. Bevilacqua at (908) 806-8844 or email him at

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