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Guaranteed Replacement Cost for Commercial Property Owners


If you own a business, you understand the importance of safeguarding your assets. While this kind of protection addresses both liability and the personal safety and health of your staff, it also includes the substantial investment you’ve made in the commercial property that allows your business to flourish.

With inflation as a priority concern, business owners who are keen to fully protect their commercial property investments are increasingly turning to Guaranteed Replacement Cost (GRC) coverage to make sure their insurance coverage keeps pace with an evolving business landscape.

What is Guaranteed Replacement Cost Coverage?

Ordinarily, an actual cash value (ACV) insurance claim will be settled by first taking into account depreciation — the value of the property minus the value of the use it has provided since it was purchased. Like a used car with mileage on its odometer, commercial property loses a certain amount of technical value over time, and this expended value is deducted from its original cost when an insurance claim is made.

While this makes sense at an accounting level, it can be problematic at a practical one. Due to inflation, the cost of labor and materials required to restore commercial property to operational condition after an incident can—and often does—far exceed your policy limits.

To bridge the gap between what an ACV policy will cover and the actual cost of restoring your property, a commercial GRC policy will cover the actual cost of fully repairing or replacing your property in the event of a covered loss — with no applied depreciation — even if the costs exceed your policy limit.*

Advantages for Commercial Property

Rick Romanowicz, New York state commercial insurance manager at Erie Insurance, strongly recommends GRC for commercial clients.

“GRC is the way to go,” he says. “There are several benefits it offers.”

Important advantages include:

  • Inflation protection. As seen during the 2020 pandemic, the cost of construction materials and labor can skyrocket in a brief span of time, let alone over the long term. “One of the best reasons to have GRC is to soften the impact of inflation,” says Rick. He frames the benefits in practical terms: “During reconstruction, would you want the builder to simply stop building when the coverage limit is reached due to increased costs?”
  • Depreciation doesn’t matter. By contrast to other policies, GRC ignores depreciation. You get a fair price to repair or replace your property regardless of its age.
  • No shocks or surprises. You know exactly what to expect with GRC: no worries about shocking expenses or hidden costs. “It’s not unheard of for reconstruction costs to wind up being greater than building from scratch, which can be pretty surprising to people,” Rick notes. By selecting GRC, you’re covered for the full cost of restoring your property with no surprises.
  • Peace of mind. With GRC, you won’t have to worry about how to get your business back on its feet after a disaster. Even if the cost of restoration exceeds your policy limit, you’re covered. “Some insurance carriers only offer up to 125% extended coverage for increased costs, which means you’d have to pay the difference,” says Rick. “With our Guaranteed Replacement Cost coverage, there is no cap.”

Read more on how GRC can protect your business.

Operate With Confidence

Eliminating distraction and worry is a key part of business success. A commercial insurance policy from Erie Insurance with Guaranteed Replacement Cost coverage is an excellent way to protect your investment and give you peace of mind. Contact us today to learn how we can help you find the confidence and peace of mind to stay focused on your business.

*Terms, conditions and exclusions may apply.

ERIE® insurance products and services are provided by one or more of the following insurers: Erie Insurance Exchange, Erie Insurance Company, Erie Insurance Property & Casualty Company, Flagship City Insurance Company and Erie Family Life Insurance Company (home offices: Erie, Pennsylvania) or Erie Insurance Company of New York (home office: Rochester, New York).  The companies within the Erie Insurance Group are not licensed to operate in all states. Refer to the company licensure and states of operation information.

The insurance products and rates, if applicable, described in this blog are in effect as of January 2024 and may be changed at any time. 

Insurance products are subject to terms, conditions and exclusions not described in this blog. The policy contains the specific details of the coverages, terms, conditions and exclusions. 

The insurance products and services described in this blog are not offered in all states.  ERIE life insurance and annuity products are not available in New York.  ERIE Medicare supplement products are not available in the District of Columbia or New York.  ERIE long term care products are not available in the District of Columbia and New York. 

Eligibility will be determined at the time of application based upon applicable underwriting guidelines and rules in effect at that time.

Your ERIE agent can offer you practical guidance and answer questions you may have before you buy.

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