Replacement Cost Value

Glossary - Letter - R

Replacement cost value is the amount that an insurer will pay you as a result of a claim that is approximately equal to the costs of similar items if you were to purchase them again.  It will not reflect depreciation and thus, if you, for example, purchased a washing machine for $2,000 and it was damaged during a fire two years later, you will receive not $2,000 but rather the amount of a similar washing machine (same brand, same features), which could be $1,800, or $2,500 depending on what a similar washing machine would cost today.

You should not mix the replacement cost value with an actual cash replacement, which does consider decrease in value over time, and would offer you the current value for a depreciated item.

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