Replacement cost is defined as the cost to replace damaged property with new property without deduction for depreciation.

Replacement cost is defined as the cost to replace damaged property with new property without deduction for depreciation.

• A. True
• B. False
• C. Only for new properties
• D. It includes depreciation

Answer: (A)

Replacement cost means the amount needed to replace damaged property with new property of like kind and quality at current prices, with no deduction for depreciation. This is what you’d use when the policy pays replacement cost, as opposed to actual cash value where depreciation is subtracted. Some policies may have limits or conditions, but the core idea remains: depreciation isn’t deducted when calculating replacement cost. So the statement is true. Saying it’s false, that it’s only for new properties, or that depreciation is included would not align with the standard definition.

Replacement cost means the amount needed to replace damaged property with new property of like kind and quality at current prices, with no deduction for depreciation. This is what you’d use when the policy pays replacement cost, as opposed to actual cash value where depreciation is subtracted. Some policies may have limits or conditions, but the core idea remains: depreciation isn’t deducted when calculating replacement cost. So the statement is true. Saying it’s false, that it’s only for new properties, or that depreciation is included would not align with the standard definition.