What is the definition of Extended Replacement Cost Coverage?
Extended Replacement Cost Coverage provides protection to the policy owner in cases where the cost of replacement is more than the limit specified on the policy. This is usually for property insurance. The policy owner gets exactly the same kind and quality as the one lost or damaged. It is aimed to ensure that the policy owner would be at the same financial position after a loss occurred. The insured person will not lose or profit from the insurance payment. It is also aimed to protect a policy owner when a major disaster happens and there is an increased demand for building materials and contractors which will cause an increase in the prices. It is computed by getting the equivalent actual cash value, less fair wear and tear and obsolescence. In essence, this is generally 120 to 125% percent of the value.
