"Insurance Built on Trust, Backed by Relationships"

Understanding the 3 Types of Property Replacement Coverage

When it comes to protecting your property and belongings, not all insurance coverage is the same. Here's a quick reference guide to the three most common types of property valuation used in insurance policies:

1. Replacement Cost (RC)

Best for: Full replacement without depreciation
Replacement Cost coverage pays to replace your damaged or destroyed property with new materials of like kind and quality—without deducting for age or wear and tear.

Example:
If your 12-year-old refrigerator is lost in a fire, a Replacement Cost policy will pay for a brand-new refrigerator of similar quality. The same applies to rebuilding a home or structure with modern materials.

2. Actual Cash Value (ACV)

Best for: Older items or properties where full rebuild is not necessary
ACV is calculated using one of these common methods:

1. Replacement cost minus depreciation

2. Fair market value of the item

3. A broader valuation method that takes all relevant factors into account

Example:
Using the same refrigerator example, an ACV policy would subtract depreciation based on age and condition—so you’d only receive the current value of a 12-year-old fridge.

ACV is often used for older homes or items that wouldn't realistically be rebuilt or replaced with new equivalents.

3. Functional Replacement Cost (FRC)

Best for: Historic or outdated structures, or to reduce premiums
FRC covers the cost to replace a damaged item or structure with a less expensive, functionally equivalent alternative.

Example:
Instead of replacing a damaged mahogany banister with new mahogany, FRC might allow replacement with a pine banister that serves the same purpose.

This option often lowers the insured value and premium, while still providing protection that restores function.

Not sure which type of coverage you have or need?
📞 Call All About Insurance at 970-292-8116
We’ll walk you through your current policy and help ensure you’re covered in the way that works best for your property, budget, and peace of mind.