Replacement Cost vs.
Actual Cash Value
Even if you obtain all the
necessary insurance coverage to protect your business, do you know how
your assets are insured? The most common valuations used are Replacement
Cost and Actual Cash Value.
Replacement Cost is simply the cost to replace lost or damaged
property with similar property.
Actual Cash Value is more complicated, as deductions are made for
depreciation. Consider a computer insured as actual cash value which
becomes damaged. The insurance company would take the replacement
cost of the computer, and subtract the years of wear and tear the
computer endured before it was damaged to determine the amount of
reimbursement to the insured.