Replacement Cost Endorsement
Definition:
A policy add-on that ensures claim payments are based on replacement cost instead of actual cash value.
Explanation:
This endorsement prevents depreciation from reducing payouts, allowing homeowners to replace items with new equivalents.
Example:
If a 10-year-old roof is destroyed, replacement cost coverage pays for a brand-new roof, not the depreciated value.
Why it matters:
This term affects how claims are handled and what payout a homeowner may receive.