YOU ASK:
What is the definition of Replacement Cost?
WE ANSWER:
Replacement Cost refers to how much is currently needed to buy a specific asset or to replace it with a similar asset.
The insurance company will appraise replacement cost in the event that it needs to pay the insured person for something he has lost or something that was damaged. Of course, that thing or asset should be covered by the policy. Replacement cost is not about how much was paid for the original asset; rather, it looks at how it can replace the lost item using the current market value.
The computation of replacement cost is government by the policy's terms and conditions, including the assessment of the asset's current conditions and whether it can still be repaired or not.
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More insurance terms around replacement cost:
- Repurchase Agreement / Repo
- Reserves
- Residual Disability Insurance
- Residual Disability
- Residual Market
- Retention
- Retrocession
- Retrospective Rating
- Return on Equity
- Revocable Beneficiary
- Renters Insurance
- Renewable Term Insurance Policy
- Relation of Earnings to Insurance Clause
- Reinsurance
- Reinstatement
- Registered Representative
- Registered Principal
- Reduced Paid-Up Insurance Option
- Redlining
- Reciprocal Exchange