Replacement cost is the amount that would be required to be paid, at the present time, to replace an asset. In the insurance industry, "replacement cost" is a method used to value a covered item. Replacement cost is not market value, but is instead the cost to replace an asset at its pre-loss condition. It is not the same as market value, which reflects an asset's purchase price if sold. For example, if a house is insured for replacement cost, if you have a loss, your insurance pays to rebuild your home, not buy a new one.
