What does functional replacement cost involve?

Functional replacement cost involves using cheaper, modern construction to replace property. This approach is often utilized when the original materials are not available or when it's more cost-effective to use contemporary materials that achieve a similar function. The goal is to provide a replacement that serves the same purpose as the original without necessarily matching it in terms of materials or design.

This method allows for more flexibility in the restoration process and can often result in lower costs for the insurer. By using updated construction techniques or materials, insurers can minimize expenses while still ensuring that the property is functional and meets the needs of the policyholder.