What does FRC stand for in property insurance terms?

In property insurance, FRC stands for Functional Replacement Cost. This term refers to a method of valuing property where a policyholder is reimbursed for the cost to repair or replace the property with a different item that serves a similar function but may not be an exact replica of the original. This approach is often applied when the original materials or construction methods are no longer available or practical.

For instance, if a property with unique architectural features is damaged, the insurance might not cover the full reproduction of those features. Instead, it would cover the cost of replacing damaged items with modern materials or methods that fulfill the same purpose but do not replicate the original exactly. This concept is particularly useful for property that has specialized value, as it allows the insured to recover costs without necessarily restoring the item to its original state.

Understanding this term is crucial for ensuring that policyholders know how their claims may be treated when it comes to replacing or repairing property.