Replacement Cost

Definition

  • The amount of money needed to replace an asset with another of equal value. Depreciation is not taken into account when calculating an asset's replacement cost. For example, if a refrigerator is damaged due to an insured event, the replacement cost will be equal to the cost of a new refrigerator, regardless of if the damaged refrigerator is a year old or twenty years old. Also known as a "replacement cost value" or "replacement value."

Synonyms
asset replacement cost, replacement cost value, item replacement cost, replacement value

Related Terms and Acronyms

  • Actual Cash Value (ACV) Acronym,
    • The replacement cost of an insured asset with depreciation accounted for.
    • The amount of money that a broker or dealer has invested in the purchase and repair of a used vehicle.
  • Extended Replacement Cost Definition,
    • A replacement cost for an asset that exceeds that of the actual cash value of the asset.
  • Fair Market Value (FMV) Acronym, Very Important,
    • The highest price that a buyer would pay for a property and the lowest price a seller is willing to accept.
  • Insurable Value Definition,
    • The total amount that an asset can be insured for.
  • Insured Value Definition,
    • What an insurer will pay to replace an insured asset.
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