For many people, their home is their most valuable investment. To protect this investment, homeowners frequently purchase their home insurance through their mortgage lender, who requires a minimum amount of insurance as a condition of the loan. While this amount of insurance satisfies the lender, it is often not anything close to the amount that it would cost to rebuild your home if it was ever destroyed in a fire, or other disaster. The realty value of a home can greatly differ from what it would cost to rebuild from the ground up.
Broad policies move beyond the “named perils” to protect the structure of your home from “all risks”. This coverage typically protects your home from any peril unless the policy specifically excludes it. One common exclusion is poor workmanship or improper installation. Under Broad insurance, your personal belongings remain insured on a “named perils” basis. This is a mid-priced compromise between the standard insurance, which may seem too risky, and the comprehensive coverage, which comes at a higher premium.
“Home values increase, so it is quite possible for your home to cost more to rebuild today than it did when you originally purchased your home, and home insurance.”~Chad Mullen, Lane’s Insurance
Guaranteed Replacement Value home insurance means that in the event of a disaster, your home will be rebuilt — no matter what the cost. This policy is designed to absorb the increased cost of construction and materials, and cover an amount that exceeds the total amount of your policy, if needed. Again, the Guaranteed Replacement insurance would only come into play if you suffered a major loss, but adding this additional coverage would mean it would be there when you need it the most.