CANADIAN INSURANCE TERM
Replacement Cost
A method of valuing insured property based on the cost to replace it with comparable property, subject to policy conditions, limits and settlement rules.
Plain-language definition. A real policy, endorsement and provincial law can use more specific wording than a glossary summary.
TermReplacement Cost
ContextCanadian insurance
Source typeIndustry glossary
Policy wordingControls claim
What does Replacement Cost mean?
A method of valuing insured property based on the cost to replace it with comparable property, subject to policy conditions, limits and settlement rules.
Replacement cost is different from resale value, market value and actual cash value. The distinction matters for both home rebuilding and personal belongings.
Replacement Cost in practice
An older sofa may have a low resale value but a much higher cost to replace with a comparable new sofa after a covered loss.