Reproduction Cost

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DEFINITION

The costs involved with identically reproducing an asset or property with the same materials and specifications as an insured property based on current prices. Insurers use reproduction cost as a method of valuation to calculate the costs involved with the risk of replacing an insured asset with an identical one at the same location.

Reproduction cost looks at the cost of creating an exact replica, and should not be confused with replacement cost, which looks at the cost of replacing an insured property with one of similar functionality.

INVESTOPEDIA EXPLAINS

Different insurance contracts will insure for a different cost. While some insurers will pay out an amount to purchase a similar asset of same functionality; others will pay out an amount to purchase an identical property. Because these amounts can differ greatly, it is important to know the terms in your own insurance contracts.


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