What is the definition of “Replacement Cost Value” (RCV)?
Most insurance policies require the determination of a replacement cost value of the building as well as a replacement cost value of a claim. First, the establishment of the replacement cost value of the building is often required, specifically when there is a replacement cost percentage required in the policy in order to collect replacement cost damages. This is established by use of different methods, taking into consideration the size, type of construction, quality of construction of a building and applying building cost data to establish what it would cost to replace the structure in question with like, kind and quality materials, using today’s construction methodologies. Often times this is confused with “market value”; however the replacement cost value of a building is simply construction and does not take into consideration land values, landscaping, driveways etc. The Actual Cash Value (or depreciated value) is normally a negotiated percentage taken off of each item, or each tr
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