1. 14231 POINTS
    Tom Sheehan
    Agency Owner, The Thomas G Sheehan Agency, 27 Glen Road Sandy Hook, CT 06482
    Simply stated, "Replacement Cost" is the estimated amount that it would cost to replace your home to the condition that it was prior to a covered loss, using materials of like kind and quality and subject to current building codes.  It is a good idea to factor in the cost of demolition as well, since if there is a loss, all or a portion of your current home may have to be leveled in order to prepare the sight for reconstruction.
    Answered on November 25, 2013
  2. 475 POINTS
    Michael Pelfrey
    Owner/Agent, Pelfrey Financial Services, Lexington, KY
    The difference between “replacement cost” and “fair value” coverage can be significant.  If a home with a roof 15 years old suffers hail damage, fair value coverage would only pay 25% of the cost of a new roof assuming a 20-year roof life.  Replacement cost would pay the full cost of replacing roof.  This applies to both the home and all its contents.  Carefully consider the difference in premium between replacement cost and fair value coverage.
    Answered on November 25, 2013
  3. 14231 POINTS
    Tom Sheehan
    Agency Owner, The Thomas G Sheehan Agency, 27 Glen Road Sandy Hook, CT 06482
    "Replacement Cost" as a term in a Homeowners' policy refers to the "Settlement Option" that your Insurance Company would use when processing your claim. In general terms, replacement means that your item would be replaced with one of like kind and quality should it be lost or severely damaged as a result of a covered peril. Most modern Homeowners' policies include this with regard to your Personal Property. Some still offer this for your Dwelling but in most cases these days, a policy will have some modified version with regard to the house itself. The principal is very much the same in that the policy will pay for replacement using building materials of like kind and quality, but the total amount available may be limited to 125% of the current stated dwelling amount listed on the policy.
    That is why it is a good idea that you and your Insurance Professional review your coverage and have an up to date "Reconstruction Analysis" completed every couple of years or so.
    Answered on September 23, 2014
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