Guaranteed Replacement Cost On The Building And Contents: Your Responsibilities

Insurance Tips
03 Jan 2019

Whether you’re purchasing a new home and need Home Insurance coverage to protect both your property and your belongings, or you’re looking to renew your current policy, it’s important to understand what your coverage means. More specifically, it’s important to understand what your policy covers if it states that you will have ‘guaranteed replacement cost’ on the building, as well as on its contents.


What Does Guaranteed Replacement Cost Mean?

When you’re shopping to purchase Home Insurance, often you will receive the option to insure your property and your contents for either Actual Cash Value, or Replacement Cost. And while generally, it’s slightly more expensive to insure your home and your belongings under guaranteed replacement cost, many homeowners find it to be the wiser decision. This is because policyholders are provided with the replacement cost of not only their items but the dwelling. Meaning you will be entitled to receive the original amount that you paid to replace and rebuild, or a replacement of the same time that was destroyed or damage during your loss. This is more attractive to many as it does not take into consideration the depreciation of your home or your belongings. So when you purchase expensive electronic-stainless steel appliances, you can rest easy knowing that even in the future, as their value depreciates, your insurance policy will commit to replacing it at its original cost. However, it should be noted that when purchasing this coverage, you need to keep in mind, what your obligations as a policyholder are concerning the policy.


Guaranteed Replacement Cost On Buildings: Your Responsibilities 

While this coverage option is the more attractive option for many policyholders when they’re insuring their home, choosing the option of Guaranteed Replacement Cost on your property does require you to be aware of a few things. Specifically, how the Insurance Bureau of Canada states that if you would like to maintain this coverage, you as the property owner are obligated to not only “maintain a coverage amount that is not less than 100% of the cost to replace the dwelling building”, but you are required to “maintain a coverage amount that is not reduced from the replacement cost derived from a valuation program”. Meaning you must continue to maintain your property to the standards that it was initially valued at. Prompting homeowners to upkeep their home rather than letting it depreciate in value.

However, it should be noted that while you are maintaining your property to the standards that it was initially valued at, if you find that your maintenance has increased the value or worth, you should speak to your insurance provider. You may need to have your home valuation updated so in the event of a loss, you truly receive the worth of your property. This is especially important when you are upgrading your home through renovations.


Guaranteed Replacement Cost On Contents: Your Responsibilities

Similarly, Guaranteed Replacement Cost on contents allows policyholders to feel confident that if they suffer a loss where their belongings are damaged, they will receive compensation for what that item was worth when it was first bought. Meaning, it does not take into consideration the depreciation of the item as Actual Cash Value coverage would. But again, similar to the Guaranteed Replacement Cost on a building, it’s essential that you are aware of the steps you need to take to ensure that you are properly covered;

  • You need to a home inventory list,
  • You need to keep a ‘proof of purchase’ of your items.

It should be noted that antique, rare, or are high-priced items may not be covered under a basic Guaranteed Replacement Cost policy. This is due to how their high-price can easily max-out your coverage. So it’s suggested that for any expensive, collectable, or rare items that you have, to discuss them with your insurance provider as you may find it better to insure them under their own policy.

When it comes to insuring your home, or your belongings, we want to make sure that you’re confident that you’re protected if a loss occurs. Contact your Waters Insurance representative today to learn what exactly your current Home Insurance policy covers and discuss what your responsibilities are so you receive the right protection if a loss occurs. As every situation is different, you may find that your Waters Insurance representative will require you to adjust your responsibilities so you can receive the right compensation. We’re here to help you better protect the home you’ve worked so hard to build.