Replacement Cost (vs Actual Cash Value)
Definition. Replacement Cost coverage pays to replace damaged property with new equivalent. Actual Cash Value (ACV) pays replacement minus depreciation.
Also known as: RC, Replacement Cost Coverage
Replacement Cost is the strongly preferred choice for any business property. ACV applies depreciation, often paying 30-70% less than replacement. The premium difference is usually only $50-$150/year — well worth the upgrade.
Example
$10,000 commercial computer destroyed by water damage. Replacement Cost pays $10,000 to buy a new one. ACV would pay $3,500-$5,000 after depreciation.
Sources cited
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📘 Educational content only.
Reviewed by California-licensed Property & Casualty insurance agent
Jason Wootton (CA License #0I94454). Not insurance advice, an individual recommendation, or a solicitation in any state. Insurance regulations vary by state. For specific coverage decisions, consult a licensed insurance agent in your state.
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