What is a guaranteed replacement cost policy?

A guaranteed replacement cost policy pays to rebuild your home to its original condition regardless of the cost, even if it exceeds your policy's dwelling limit. This differs from standard replacement cost coverage, which caps the payout at your policy limit. During periods of high construction inflation or after widespread disasters that drive up building costs, guaranteed replacement cost can be invaluable. Not all insurers offer this coverage, and it typically costs more than standard replacement cost. Review your policy carefully to understand whether it covers cost overruns.