Which option best defines Replacement Cost New?

Which option best defines Replacement Cost New?

• A. Actual Cash Value minus depreciation
• B. Replacement Cost New
• C. Market Value
• D. Stated Value

Answer: (B)

Replacement Cost New is the amount required to replace damaged property with a new item of like kind and quality at current prices, with no deduction for depreciation. This means you’re getting funds to buy a brand-new replacement rather than a depreciated value for the old item. It differs from Actual Cash Value, which subtracts depreciation; it’s not the same as Market Value, which is what someone would pay for the item in the open market; and it isn’t the Stated Value, which is the policy-specified limit. For example, a 10-year-old appliance that cost $1,000 new might have an actual cash value much lower due to wear, but replacement cost coverage would pay enough to replace it with a new model of similar type and quality, up to the policy’s limits and after any applicable deductible.

Replacement Cost New is the amount required to replace damaged property with a new item of like kind and quality at current prices, with no deduction for depreciation. This means you’re getting funds to buy a brand-new replacement rather than a depreciated value for the old item. It differs from Actual Cash Value, which subtracts depreciation; it’s not the same as Market Value, which is what someone would pay for the item in the open market; and it isn’t the Stated Value, which is the policy-specified limit. For example, a 10-year-old appliance that cost $1,000 new might have an actual cash value much lower due to wear, but replacement cost coverage would pay enough to replace it with a new model of similar type and quality, up to the policy’s limits and after any applicable deductible.