Replacement Cost
Coverage that pays to rebuild or replace your damaged property at today's prices, with no deduction for depreciation.
Replacement Cost coverage pays the actual cost to replace damaged property with new equivalent items, without subtracting for age or wear. The opposite is Actual Cash Value (ACV), which deducts depreciation — meaning a 10-year-old roof that costs $20,000 to replace might pay out only $8,000 under ACV.
Most modern homeowners policies use replacement cost for the dwelling itself, but personal property (your stuff) often defaults to ACV unless you specifically buy "Replacement Cost on Contents." That endorsement typically adds 5-10% to your premium and is one of the most worthwhile upgrades you can make.
For the dwelling, watch out for "Coverage A" being set too low. If your house would cost $500,000 to rebuild (materials + labor at today's prices) but your dwelling limit is $350,000, you're underinsured by $150,000 even if your policy says "replacement cost." Carriers also enforce a coinsurance clause requiring you to insure to at least 80% of replacement cost, or they reduce your payout proportionally.
This is why an annual replacement-cost estimator review with your agent matters — construction costs in IL/IN/WI have risen 20-40% since 2020.
Related terms:Actual Cash Value (ACV)·Dwelling Coverage (Coverage A)·Personal Property Coverage (Coverage C)
Related Geneva services:Home Insurance·Condo Insurance·Renters Insurance