Replacement Cost Value vs. Actual Cash Value – Homeowner’s Insurance Policy

Edge of a residential roof showing significant damage

Replacement Cost Value (RCV) and Actual Cost Value (ACV) refer to your specific type of coverage and how your homeowner’s insurance policy will reimburse you for property damage after a covered loss. 

What is Replacement Cost Value? 

RCV policies help pay to replace or repair damaged property without deducting for depreciation. This type of coverage will typically help repair or rebuild your home with materials of similar quality. In other words, this is the amount of money needed to repair or rebuild your home at today’s building prices. 

What is Actual Cash Value? 

ACV means exactly what it sounds like. It’s the actual cash value of an item, as opposed to what it would cost to replace that item with a brand-new version. ACV policies, after a covered claim, typically pay the amount of money needed to fix your home, minus the decrease in value of your property because of age or wear and tear, also known as depreciation. So, the amount received from your insurance carrier, most likely won’t be equal to the cost of repairing or rebuilding your home at today’s prices. 

What’s the big difference? 

RCV insurance is often the default option for most carrier, but it’s always your choice to choose between these two options. RCV policies pay more in case of damage and theft, but it also costs more in premiums. ACV policies pay for less but saves you money on premiums. 

When it comes to your home’s damage, you could be on the hook for more than your deductible to get your home repaired if you have an ACV homeowner’s policy.  

If you aren’t sure what type of coverage you have or if it’s been while since you’ve reviewed your homeowner’s policy for deductible amount, dwelling coverage, etc., it’s probably time to call your insurance agent for a policy review.