INSURANCE GUIDE
Replacement Cost vs. Actual Cash Value
Replacement cost and actual cash value can produce different property claim outcomes. The valuation method is an important part of homeowners, landlord, and commercial property coverage.
Quick answer
Replacement cost generally measures the cost to repair or replace covered property without a deduction for depreciation, subject to policy terms. Actual cash value generally reflects depreciation or another policy-defined valuation method.
Why it matters
Two policies can insure the same building or property but produce different claim payments because the valuation basis differs. Deductibles, limits, coinsurance, and settlement conditions can also affect the result.
Replacement cost
Policies may require the property to be repaired or replaced before the full replacement-cost amount is payable. Time limits and documentation requirements may apply.
Actual cash value
Actual cash value may result in a lower settlement because age, condition, depreciation, or policy-specific valuation rules can reduce the payable amount.
What to review
Look at the valuation provision, building and personal-property limits, coinsurance requirements, ordinance or law coverage, roof settlement provisions, deductibles, and any special endorsements.
Related resources
Coverage note: Insurance coverage varies by insurer, policy form, endorsement, limits, exclusions, and the facts of a claim. This article is general educational information and is not a substitute for reviewing the actual policy.
In this guide
- Replacement cost
- Actual cash value
- Settlement conditions
- Property limits
Related coverage
Questions about this coverage?
Talk with ECLICK about your current policy, upcoming renewal, or the coverage you are comparing.