Glossary

Replacement cost

What it would cost to repair or rebuild with materials of like kind and quality at today's prices, with no deduction for age or wear.

Also called: RC, RCV, replacement cost value

Replacement cost is the amount needed to repair or replace damaged property with new materials of like kind and quality at today's prices, with nothing subtracted for age or wear. It is not what your house would sell for, and it leaves out the land.

Most HO-3 policies settle dwelling losses on a replacement cost basis, but the money usually arrives in two steps. The insurer first pays the actual cash value and holds back the depreciation. When you finish the work and send the invoices, it releases the holdback, up to your policy limit.

The standard ISO form also expects you to insure the dwelling to at least 80% of its full replacement cost. Fall short and the payment is reduced. Say your limit is $240,000 and the home would cost $400,000 to rebuild. The test is $240,000 divided by 80% of $400,000, or 75%, so a $20,000 loss pays about $15,000 (or the actual cash value, if that is higher).

Personal property is often paid at ACV unless you add a replacement cost endorsement such as ISO HO 04 90. To set the dwelling limit correctly, use the home replacement cost estimator, and read why market value is the wrong number before you rely on a purchase price.

Last reviewed October 10, 2026

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Related terms

Actual cash value What an insurer pays for damaged property: the cost to repair or replace it today, minus a deduction for age and wear, so less than a new-for-old payment. Depreciation The loss in an item's value from age, wear and obsolescence, which an adjuster subtracts when pricing what a claim should pay. Extended replacement cost Extra dwelling coverage, often 25% or 50% above the Coverage A limit, that helps pay to rebuild when the actual cost after a loss exceeds the limit. Dwelling coverage (Coverage A) The part of a homeowners policy that pays to repair or rebuild the house itself, including attached structures such as a garage, porch or deck. Recoverable depreciation The part of a replacement cost payment an insurer withholds at first and releases after you finish the repair or replacement and send proof of the cost.

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Related insurers

Georgia Farm Bureau Insurance Macon-based mutual that sells home, farm and auto insurance only in Georgia, to Farm Bureau members, through agents in 158 of the state's 159 counties.

Related tools

Coinsurance and insurance-to-value calculator Test your dwelling limit against the 80% insurance-to-value rule and see how much a partial loss claim shrinks if you fall short. Depreciation calculator: actual cash value vs replacement cost Estimate what belongings are worth after depreciation, what an actual cash value check would be, and how much a replacement cost policy pays back later. My home insurance went up: what to do A guided path for a renewal increase: find out why it rose, check your dwelling limit against rebuild cost, then compare quotes on the same coverage. Home inventory builder Build a room-by-room list of belongings and replacement costs, compare the total with your personal property limit, and flag items over the standard limits. Homeowners quote comparison worksheet Enter up to five homeowners quotes in columns and see where the coverage differs, so the cheapest price is not just the least coverage. Home replacement cost estimator Estimate what it would cost to rebuild your house from the ground up, the number your dwelling coverage should match, using a per-square-foot cost you supply.