The short answer
Replacement cost pays to repair or replace damaged property with similar property, without subtracting for depreciation. Actual cash value pays replacement cost minus depreciation. A deductible is the part of each loss you absorb. A self-insured retention, common in liability policies, is an amount you must pay, often including defense costs, before the insurer’s obligations begin.
Why it matters
The valuation method alone can swing a property claim by tens or hundreds of thousands of dollars. Retentions can also leave a business paying for its own defense for months before coverage begins.
Where it fits in your case
In property claims, as soon as the insurer begins valuing the loss. In liability claims, when a lawsuit triggers a policy with a retention.
What to expect
Payment in two steps. Many replacement cost policies pay actual cash value first and release the depreciation holdback only after repairs are completed, often within a deadline.
Depreciation disputes. How much depreciation is applied, and to which items, is a common point of disagreement.
Coinsurance. If the property was insured for less than a required percentage of its value, often 80 percent, even a partial loss can be reduced proportionally.
Limits still apply. Replacement cost is capped at the policy limit unless an extended replacement cost endorsement adds more.
Deductibles and retentions differ. A deductible is usually subtracted from the insurer’s payment. A retention generally must be satisfied first, and policies differ on who may satisfy it.
What to do now
Read the policy’s valuation, coinsurance, and deductible provisions together.
Get your own itemized repair estimate.
Ask the insurer to itemize its depreciation.
Calendar any deadline to complete repairs and recover the holdback.
For retentions, track every dollar spent and keep the insurer informed early.
What we need from you
The policy and declarations page, both sides’ estimates, the insurer’s valuation, and repair invoices.
Common misconceptions
“Replacement cost means full payment up front.” Many policies hold back depreciation until repairs are done.
“Depreciation is gone for good.” It is often recoverable once repairs are completed on time.