Replacement Value

Definition - What does Replacement Value mean?

Replacement value is a property insurance term referring to the cost of replacing an asset in its pre-loss condition with an asset of a like kind and quality.

Replacement value is also known as replacement cost.

Insuranceopedia explains Replacement Value

Replacement cost differs from the other primary valuation method known as actual cash value (ACV), which takes into account other factors, such as depreciation and market value. Therefore, coverage for the former costs more than the latter. In addition, most property insurance policies that offer this coverage stipulate that the asset must be actually repaired or replaced before the insurer pays out the replacement cost as way to prevent overinsurance.

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