Replacement Cost vs. Actual Cash Value

Replacement cost generally refers to what it would cost to replace damaged property with new property of like kind and quality, subject to policy terms.

Actual cash value generally accounts for depreciation—age, wear, and condition—so a claim payment may be lower than the cost of buying a new item.

Policies can apply different valuation methods to the dwelling, to contents, and to specific items such as roofs. Knowing which method applies to which part of your policy is one of the most useful questions you can ask before a loss happens.