What is a functional replacement cost in insurance?

"Functional replacement cost" means the amount which it would cost to repair or replace the damaged building with less costly common construction materi- als and methods which are functionally equivalent to obsolete, antique or custom construction materials and methods used in the original construction of the building.
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What does functional replacement mean?Functional Replacement Cost — the cost of acquiring another item of property that will perform the same function with equal efficiency, even if it is not identical to the property being replaced.

What does functional replacement cost mean in insurance?

Functional Replacement Cost — the cost of acquiring another item of property that will perform the same function with equal efficiency, even if it is not identical to the property being replaced.

What is a functional replacement cost in insurance?

Definition. Functional Replacement Cost Provision or Endorsement — a property insurance provision changing the valuation basis otherwise applicable (actual cash value (ACV) or replacement cost (RC) value) to valuation at the cost to replace the damaged or destroyed property with property that serves the same function.

What is the difference between functional replacement cost and replacement cost?

Functional replacement cost valuation provides a lower valuation than replacement cost, resulting in a reduction of the amount of insurance coverage required and thus lower premiums. FCR coverage may be more favorable for certain items than actual cash value.Dec 13, 2009

Related Questions

What is functional replacement coverage?

Functional Replacement Coverage (FRC) is used when a functionally equivalent building can replace the original at a lower cost than would be required by an identical replacement.Dec 13, 2009

How does functional replacement cost work?

'Functional replacement cost' means the amount which it would cost to repair or replace the damaged building with less costly common construction materials and methods which are functionally equivalent to obsolete, antique or custom construction materials and methods used in the original construction of the building.

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