Can the insurance company replace an item instead of paying for it?

The answer depends on what kind of insurance you are talking about, whether it is listed as a replacement value item in your policy, and other concerns. As a rule, insurance companies are not traders, and will not "just happen to" have matching replacement items of what you lost available to give you. Where personal property such as jewelry is involved, it would be cause for wariness if the insurance company offered you replacement jewelry rather than paying the insured value.

In car insurance, the answer will depend on the type of insurance you have, the cause of the incident, and the claim itself. Most car insurance policies insure the vehicle for cost minus depreciation, and that means you will not receive full replacement value. If you want full replacement value coverage for an automobile, you will have to have a special rider on your policy, and you can expect to pay a little more to have it.

In most cases where an item claim has been made against a policy, it is more efficient for the insurance company to write you a check for the claim amount rather than get involved in trying to find a suitable replacement item. If the item has a depreciating value, your payment is subject to be considerably less than what you paid for the item, but unless your policy specifically states that it will replace an item, you will have to settle for what you can get.