Also known as “guaranteed replacement cost” this coverage normally pays a certain percentage above the policy limit to replace a damaged home. The amount above the policy limit is generally 120% or 125%. The purpose of the endorsement is to provide adequate coverage for replacement cost after a major disaster such as a tornado or hurricane. Often, in these situations, building materials and construction workers can be in short supply, pushing up the cost of repair and rebuilding. The extended replacement cost endorsement pays an extra percentage to cover these increased costs. A pure guaranteed replacement cost will pay whatever is necessary to replace the structure.