Replacement Cost

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DEFINITION of 'Replacement Cost'

The cost to replace the assets of a company or a property of the same or equal value. The replacement cost asset of a company could be a building, stocks, accounts receivable or liens. This cost can change depending on changes in market value.

Also referred to as the price that will have to be paid to replace an existing asset with a similar asset.

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BREAKING DOWN 'Replacement Cost'

Replacement cost insurance can be purchased to protect and cover a company or individual from this type of cost. This insurance pays the full amount needed to replace the asset or property. The gradual reduction of the asset value or depreciation is not taken into account for insurance purposes.

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