Replacement cost insurance

Replacement cost insurance

Insurance that pays out the full amount required to replace damaged property with new property, without taking into account the depreciated value of the property.

Replacement Cost Insurance

An insurance policy in which the insurer will pay the entire cost of replacing the insured asset in the case it is damaged or destroyed. That is, there is not maximum benefit on the policy; the insurer simply pays the replacement cost regardless of what it is. Importantly, a replacement cost plan does not take depreciation into account.
References in periodicals archive ?
Fannie Mae guidelines require replacement cost insurance and assign the responsibility to the lender to ensure that the homeowner obtains insurance in compliance with Fannie Mae guidelines.
This webinar will be hosted by Kathy Taub, member, Arent Fox, who specializes in structuring recently testified as an expert witness on construction contracts in the replacement cost insurance proceedings for the World Trade Center complex.
The gap in standard coverage underscores the fact that replacement cost insurance merely replaces the building with the same or similar material.
Replacement cost insurance does cover the cost of rebuilding.
Real estate lenders require that borrowers obtain full replacement cost insurance so that should a casualty occur, their loan can be repaid in full.
Second, for all property owners (individuals and business owners) who don't have a replacement cost insurance policy (and if they do) it is likely that they may not be able to pay their mortgages AND what it will cost the replace the home or office.
Replacement cost insurance is defined as the cost to replace and/or repair the building with materials of like kind and quality following a loss.
If policyholders have replacement cost insurance, they may receive advance payments for the depreciated value for furniture, televisions, clothing and other household items.