What is 'guaranteed replacement cost' or 'extended replacement cost' coverage?

Guaranteed Replacement Cost (GRC) — increasingly rare — pays whatever it costs to rebuild the home even if the cost exceeds the Coverage A limit, with no ceiling. Extended Replacement Cost (ERC) — more common today — pays beyond the Coverage A limit up to a specified percentage (typically 125% or 150% of Coverage A). Both provide protection against the common situation where rebuilding costs more than the policy limit due to inflation, code upgrades, or unexpected complications during construction. Without one of these features, a home insured for $400,000 that costs $480,000 to rebuild would leave the homeowner $80,000 short. ERC is often a standard feature on premium policies and an endorsement on basic policies; insurers often require periodic re-evaluation of the dwelling value to maintain the protection.