Replacement Cost

The cost of replacing damaged or stolen property without the application of depreciation. Replacement cost claims are paid with the replacement of damaged or lost old property with new property.

This is when it is invaluable to have done an inventory of your personal property. If it is electronics that have been damaged or stolen, you will likely find that new equipment is often less expensive then the older version. Examples would include computers, televisions or I-pods - all have come down in price. If your item cannot be duplicated, then you will have the option of taking something similar. The insurance company will base their coverage on what the current cost is to replace items. If you decide to take a cash payout, then the amount will be reduced to actual cash value vs replacement cost.

For your business insurance, you should be keeping values up-to-date to be sure that you have the correct replacement cost. During an economic down-swing, the prices will be lower.

The deductible for the policy will apply to the overall claim. If your claim is for $10,000 of contents, and your deductible is $500, then the most you can collect is $9,500 for net replacement cost.

You can check your policy for what type of coverage you have. Your policy declaration should state the type of coverage you have. RC usually means "replacement cost" and ACV is "actual cash value".

Take control of your insurance. Ask questions of your adviser. If you don't fully understand the answer then ask for a more detailed explanation. Be sure of what you have and why you have it.