Replacement cost is described as the cost to replace damaged or destroyed property with new property at current prices, without deduction for depreciation.

Replacement cost is described as the cost to replace damaged or destroyed property with new property at current prices, without deduction for depreciation.

• A. True
• B. False
• C. It depends on the policy
• D. It includes depreciation

Answer: (A)

Replacement cost means paying to replace damaged or destroyed property with new property at current prices, with no deduction for depreciation. This is how it differs from actual cash value, where depreciation is subtracted to reflect the item’s age and wear. So, if a sofa was destroyed, replacement cost would cover buying a new similar sofa today, not the depreciated value of the old one. Some policies may have limits or conditions, but the basic definition fits: no depreciation subtracted in replacement cost.

Replacement cost means paying to replace damaged or destroyed property with new property at current prices, with no deduction for depreciation. This is how it differs from actual cash value, where depreciation is subtracted to reflect the item’s age and wear. So, if a sofa was destroyed, replacement cost would cover buying a new similar sofa today, not the depreciated value of the old one. Some policies may have limits or conditions, but the basic definition fits: no depreciation subtracted in replacement cost.