Definition
Replacement cost means your insurer pays what it costs to replace damaged items with new equivalents—no depreciation deduction.
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Replacement cost payouts cover the full amount to replace damaged items without depreciation. More expensive than actual cash value but provides better coverage.
Pro Tip
Choose replacement cost coverage. Actual cash value leaves you shortchanged.
Example
Replacement cost insurance replacing 10-year-old roof with new roof of equivalent quality.