Definition
An insurance valuation that pays what it costs to rebuild or replace property today, without deducting for depreciation.
Replacement cost coverage pays what it would cost to repair or replace damaged property at today's prices, without subtracting for age or wear. It contrasts with actual cash value, which deducts depreciation.
Because rebuilding at current construction costs can far exceed a depreciated value, replacement cost coverage is generally what associations want for their buildings and common elements. Keeping insured values current with rising construction costs is important to avoid gaps.