Which type of insurance covers the current replacement cost of an asset?

Replacement value insurance is the correct choice because it specifically covers the cost to replace an asset with a new one of similar kind and quality, without factoring in depreciation. This means that if an insured asset is damaged or destroyed, the policy will pay out enough to buy a new replacement for that asset, regardless of its current market or depreciated value.

In contrast, actual cash value insurance calculates the payout based on the asset’s current market value, which does take depreciation into account. This often results in lower payouts that may not be sufficient to replace the asset fully. Market value insurance also aligns more closely with assessments of the asset's worth in the marketplace, which can vary significantly from replacement costs. Liability insurance, on the other hand, does not relate to the value of personal property but rather protects against claims resulting from injuries or damage to other people or their property. Thus, replacement value insurance is the only choice that guarantees coverage for the full cost of replacing an asset.