Add the costs of getting rid of the old asset to the asset’s current appraised market value, as if you were buying it new.
This is one option. The other approach involves adding up all of the costs of repairing the damaged asset, including any necessary labor, fees, or services.
It is simple to calculate the RCV of tangible assets like machinery, buildings, personal belongings, real estate, or vehicles. However, it is more difficult to determine the RCV of intangible assets like patents, trade secrets, contracts, and trademarks.
Using the previous example, the insurance appraiser would divide the actual square footage of your home by the average rebuilding costs per square foot in your neighborhood.
The replacement cost value of your home will typically be that amount.
The majority of insurance companies require you to purchase sufficient coverage to cover at least 80% of the replacement value of your home.
If you don’t, your insurance company may only reimburse you for a proportionate amount of coverage rather than the full amount.
