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Extended Dwelling Coverage: What Is Dwelling Extension In Home Insurance?

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Extended dwelling coverage may protect you from increased costs that may occur in the aftermath of natural disasters. If your area is prone to hurricanes, tornadoes, or other sudden destructive weather events, extended dwelling coverage may be necessary to keep you from breaking the bank. 

In this blog post, we’ll talk a little more about extended dwelling coverage. Keep reading to see how insurance companies can help you fill in the gaps.

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What is dwelling coverage?

What is known as “Coverage A,” or Dwelling Coverage is one of the most important parts of your homeowners policy. This clause in your insurance policy covers financial losses from damage or destruction of your home’s structure due to a covered peril.

These risks could be things like a natural disaster or structural collapse. You’re usually covered in the event of lightning strikes, falling trees, malicious acts, or fire

The possessions covered by your typical insurance policy include your porch, garage, deck, and other structures attached to your house.

If you file a claim under this type of insurance, you might anticipate a payout. The amount you get back is calculated based on your policy limit and the amount of money it takes to replace your home. 

What happens if your home has taken on overly expensive damage? In the case where your repairs and replacements exceed the roof of your policy payout, it helps to have extended dwelling coverage.

Extended replacement cost

Many insurance companies allow you to choose an endorsement called an extended replacement cost. This clause adds extended dwelling coverage to your policy. 

The purpose of this upgrade is to ensure that your insurer will pay for your home to be rebuilt to its former glory. This is the case as long as it doesn’t exceed both the normal coverage limit and the new additional percentage of coverage. 

In most cases, you can choose how much to extend your dwelling coverage with extended replacement costs. Many companies allow you to increase your limit by up to 50% to cover all your bases. 

This will help you get back to living in your home and will save you money in the long run. With this extra bit of protection, you’re less likely to pay any money out of pocket for damage to your property. 

The costs allotted to you include the costs of labor, materials, and electronics. It’s important to remember that natural disasters can cause a hike in prices for supplies. If any of these factors make the total cost of your home repair exceed your new extended limit, you’ll be responsible for the leftover charges.

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How does extended replacement cost work?

As you may know, “replacement cost” does not refer to the value of the house itself. Instead, replacement cost value regards how much money it takes to rebuild it from scratch. The amount of extra money you get from this additional coverage depends on how much you put into it. 

The calculation of the available percentage increase is determined by taking a few factors into account. These include your home’s square footage, construction style, location, and cost of materials where you’re from. 

Keep in mind that insurance companies usually fluctuate their prices to keep up with inflation and claims made by other homeowners in your area. 

Let’s say your standard dwelling policy covers you for up to $100,000. If your $200,000 home is destroyed, you will need to come up with the other $100,000 it costs to replace your home. You would have to cough up that money yourself without extended replacement cost. 

If you have an extended replacement cost that covers 20%, your coverage goes from $100,000 to $120,000. In that case, you would only have to come up with $80,000. 

Some companies will offer extended replacement cost that increases the dwelling coverage limit by up to 50%. In this case, you would only need $50,000 to cover the rest of what your new $150,000 policy doesn’t cover. 

The cost of your extended replacement endorsement will vary. Your insurance company, location, and choice of percentage increase will have everything to do with how much extra you pay for this security blanket. Obviously, those in risky areas on the coast will pay a little more. 

Also Read: How do insurance companies estimate the home replacement cost?

Guaranteed replacement cost

This type of extended coverage is very similar to extended replacement cost. The difference is that extended replacement cost depends on a predetermined percentage. 

As the name implies, guaranteed replacement cost guarantees the total amount needed to rebuild or replace your home will be covered. That means there is no set percentage or milestone that needs to be met. Regardless of your policy limits, a destroyed home will be replaced in full under a guaranteed replacement cost.

Just like with extended replacement cost, the necessary materials and labor costs will be taken into consideration if you opt for guaranteed replacement cost coverage. Dissimilarly, guaranteed replacement cost doesn’t consider your home’s market value or purchase price. 

Your home will just be evaluated for the cost of like-valued parts, and your insurance company will foot the bill. The only thing left for you is to pay your deductible

This type of extension can be difficult to find. Many insurance companies don’t offer guaranteed replacement cost. Obviously, it’s among the highest levels of protection you can get from an insurance company. As such, those who do offer this supplement will likely have you pay a pretty penny extra. 


It’s always a relief when you have a little extra cushion in the case of a destroyed home. You may look into getting extended dwelling coverage if you live in an area prone to natural disasters, or if you just want a little more peace of mind. 

If your home is struck with mayhem, you’re responsible for whatever your homeowners insurance doesn’t cover. With extended dwelling coverage, you can save money and breathe a little easier. 

Find out if your insurance company offers either extended or guaranteed replacement cost. In the event of detrimental damage, one of these supplemental coverages is sure to lessen your stress.

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Lauren Bell is a data analyst by day, content writer and editor by night. When she’s not making data discoveries, she’s writing about them! She also enjoys writing about lifestyle and finance; two of her favorite topics.

As an Arkansas native, Lauren loves the fresh air. When she’s not hard at work in front of a computer, you could catch her spending time on an outdoor adventure with her two kids.

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