replacement value

Replacement value refers to the amount needed, at present, to replace a specific item with one of similar kind and quality, taking into account the item’s age and condition. The concept often arises in insurance law, where insurers determine how much it would cost to replace property that has been destroyed, lost, or stolen. Many insurance policies distinguish between replacement cost (the cost to repair or replace without deduction for depreciation) and actual cash value (replacement cost minus depreciation). For example, Cal. Ins. Code § 2051.5 defines replacement cost coverage as the amount needed to repair, rebuild, or replace property “without a deduction for physical depreciation,” while limiting actual cash value to the depreciated amount until repairs or replacement occur.

Other legal contexts may define replacement value differently. For instance, federal regulations such as 20 C.F.R. § 362.12 use “depreciated replacement cost” when reimbursing for lost personal property. Replacement value also appears in criminal law when courts assign value to stolen property. For example, N.Y. Penal Law § 155.20 measures property value by its market value at the time and place of the crime and, if that cannot be determined, by the cost of replacement within a reasonable time after the crime.

[Last reviewed in September of 2025 by the Wex Definitions Team] 

Wex

• COMMERCE
• commercial activities
• wex definitions