Definition Of Replacement Cost Less Physical Depreciation And Obsolescence In Insurance

Definition of "Replacement cost less physical depreciation and obsolescence"

David Greenhalgh, Real Estate Agent Keller Williams Realty

Sum it takes to replace an insured's damaged or destroyed property with one of like kind and quality, equivalent to the actual cash value, minus physical depreciation (fair wear and tear) and obsolescence. The objective is to place the insured in the same financial position after a loss as prior to it; the insured should not profit or lose by incurring a loss.