Replacement cost vs. actual cash value — what's the difference and which should I pick?

Replacement cost pays what it would cost today to replace the damaged property with new equivalent property. Actual cash value (ACV) pays replacement cost minus depreciation. For a 10-year-old computer destroyed in a fire, replacement cost might be $1,500 (new equivalent); ACV might be $300 (depreciated value). ACV is cheaper to insure but leaves you funding most of the replacement out of pocket. For any meaningful property — clinical equipment, building, inventory — replacement cost is the standard recommendation. Extended replacement cost adds a 10–25% buffer above the policy limit for cases where construction costs spike (post-disaster scarcity, code upgrades). We push for replacement cost on any account where the loss could meaningfully disrupt operations.