The major difference is that replacement cost will pay for a replacement for a new one without any depreciation, while actual cash value will take into consideration the actual value of the item and take depreciation into consideration. Example: your personal computer was stolen. If it’s a replacement, you will get indemnification to get a brand new one whether actual cash value will indemnify you for the market value of your personal computer accounting for six years of depreciation. Pay attention when buying your policy as a replacement is usually a better choice.