What Is Replacement Cost For Home Insurance? 
One of the most common ways to explain ` replacement cost ' in a homeowner insurance policy is to compare it to ` actual cash value ' or ` fair market value ' . Using these common insurance terms , in a homeowner policy , actual cash value is the replacement cost of a home or personal property less depreciation . In the event of a covered homeowner policy loss , ideally you would rather have the loss amount covered in full and not subject to depreciation . This is especially important since , in the event of significant damages to the dwelling , construction cost are always escalating and could render your loss payment to a very low amount , compared to what will be the actual cost to repair the damages . 