Replacement Cost Value (RCV)
Definition:
The amount needed to replace damaged property with new property of similar kind and quality.
Explanation:
RCV policies pay the full cost to rebuild or replace, without deducting depreciation. Homeowners must typically complete repairs to recover full RCV.
Example:
If a fire destroys $5,000 worth of furniture, RCV coverage pays for $5,000 of new furniture, even if the old furniture was depreciated to $2,000.
Why it matters:
This term affects how claims are handled and what payout a homeowner may receive.