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
item replacement cost, replacement cost value, asset 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.