What is extended replacement cost (ERC) mean on my homeowners’ policy?

When an insurance determines the replacement cost of your home, which is used to determine Coverage A, they are using the best available information they have at the time. However, when your home is damaged, it could be that materials and labor are more expensive than was originally anticipated. An example is after a catastrophic event – hurricane, tornado, etc. Since hundreds of households all need repair at the same time, materials and labor are more expensive, and harder to come by. In this case the replacement cost is much higher. Purchasing extended replacement cost would allow your Coverage A to increase, which helps offset the higher costs, otherwise, any costs above your Coverage A are your responsibility.