Insurance Terms: Replacement Cost
Replacement cost is the cost of replacing property without a reduction for depreciation due to normal wear and tear.
Example: 10 years ago you paid $10,000 for a new roof on your home. Suddenly a wind storm wipes out the majority of the shingles and leaves you needing a new roof. With Replacement Cost, you get the value of what it will cost to repair or replace the roof today, regardless of what you previously paid for it.
So, if you received a great deal 10 years ago and today’s cost is more, you get what it will cost today. If you paid more 10 years ago and today’s cost is lower, you still only get the value to repair or replace your roof today. In my opinion, Replacement Cost is the way go to vs. Actual Cash Value.
Credit: National Association of Insurance Commissioners for the use of definition above.
Replacement Cost can be added to some home insurance and auto insurance policies.
There may be options available to you; enhancing your coverage to meet the needs of you and your family. Give us a call to see how we can help you with options today.
Haymaker Insurance, Federal Way, WA
An independent broker dedicated to serving the insurance needs of those in Federal Way and in our surrounding area. Insurance is more than just a policy; with the right agent it’s a tool that can protect your assets while making sure to don’t pay more than you need to get superb service.