Coverage Terms Defined: Replacement Cost and Actual Cash Value

Published: 2/17/22 (Thu)

As your political subdivision’s coverage provider, you’ll often catch us using common insurance industry terms; however, we understand these terms may be unfamiliar to you. Our Coverage Terms Defined section is designed to help you gain a better understanding of these terms within the context of NDIRF coverage.

The following terms are commonly referred to when discussing ND State Fire and Tornado Fund (NDFT) coverage, which provides property coverage for North Dakota state agencies and political subdivisions. The NDIRF has administered the NDFT since June  2019.

Replacement Cost (RC) is “the cost to replace the damaged property with materials of like kind and quality, without any deduction for depreciation” (International Risk Management Institute, 2022). It is important to review your NDFT coverage to ensure the items you would like replaced without deduction for depreciation after a loss are covered for replacement cost rather than actual cash value. Replacement cost coverage is subject to underwriting approval and is generally provided for well-maintained property. 

Actual Cash Value (ACV) “is typically calculated one of three ways: (1) the cost to repair or replace the damaged property, minus depreciation; (2) the damaged property's "fair market value"; or (3) using the ‘broad evidence rule,’ which calls for considering all relevant evidence of the value of the damaged property” (IRMI, 2022).

If you have questions about your political subdivision’s NDFT property coverage, please contact our Underwriting 
Department at

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