functional replacement cost
An endorsement available for property policies which provides for replacement of the operation or function portion of a building or property, even if the replacement is for a building of less size or the more modern equipment is of less value. To illustrate, an insured owns an aged, four-story building in which only two floors are currently used. The remaining floors have been closed and are unused. Should the building suffer a total loss, functional replacement cost would provide for the rebuild of the square footage of the two functional floors.