Your Home column: How does guaranteed replacement cost work?

Under typical homeowners' insurance, your home is covered based on the dwelling limit. This means if your house is damaged or a total loss, insurance will pay to rebuild or restore it to its condition before the loss occurred.

However, you're only covered up to the limit specified in your policy. So if your home is insured for $250,000 but it costs $300,000 to rebuild after a disaster, you'll have to either pay the extra $50,000 out of pocket or build a less expensive home.

With guaranteed replacement cost, homeowners' insurance pays whatever it costs to rebuild your home to its previous size and specifications. This coverage is often recommended for homes in areas prone to wildfires, tornadoes, and hurricanes.

Rebuilding costs can also spike after natural disasters, as there is higher demand for building materials and labor in a localized area.

If you are interested in a second look at your coverage, please reach out to Nik at DPA Insurance Services, 402-682-1691, for a free assessment of your coverage and a new quote.