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Property insuranceSubject 12 of 19

Replacement cost

A loss-settlement basis tied to the cost to repair or replace covered property without a deduction for depreciation, subject to policy terms.

Direct answer

What does Replacement cost mean?

A loss-settlement basis tied to the cost to repair or replace covered property without a deduction for depreciation, subject to policy terms.

Exam cue: Read the policy conditions, limits and timing. New York DFS notes that the policy controls the specific definition.

What does it look like in a question?

New York example

A covered roof loss is settled using the cost of comparable replacement without an age deduction when policy conditions are met.

Common exam trap

What should you not confuse it with?

Replacement cost is not necessarily the property's market value.

Related property insurance terms

Actual cash valueA loss-settlement measure commonly based on replacement cost less depreciation, subject to the policy language.DeductibleThe portion of a covered loss the insured must bear before the insurer's payment is calculated under the policy.ExclusionA policy provision that removes specified property, causes of loss, people or situations from coverage.HazardA condition that increases the chance or severity of loss.Liability coverageInsurance protection for covered claims that the insured is legally responsible for bodily injury or property damage to others.PerilAn event or cause of loss, such as fire or theft, addressed by the insurance contract.
Sources used2 references with section locators

The curriculum citation confirms exam scope. Definition and rule citations support the explanation itself. Links and locators were checked on August 26, 2026.

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