RCV vs ACV Policies


Often, when property owners are looking for an insurance policy, they do their best to juggle both cost and coverage. One of the most common choices a policyholder may make is to choose an ACV policy rather than an RCV policy. Your insurance agent may tell you that this is a cost effective way to cover your home, because you’re saving a ton of money up front on premiums! That sounds great, right? Unfortunately, the difference between RCV and ACV is often not fully explained, and can leave policyholders holding the bag and suffering the cost when a property is damaged.

Today, we’d like to give an explanation on RCV vs ACV to hopefully shed some light on how you can best cover your property to ensure a loss doesn’t leave you in the red.

First, some definitions:

• ACV stands for “Actual Cash Value” and means the actual value of the item after depreciation is deducted from the item. As an example, if your roof is three years old, your insurance adjuster may depreciate the value of that roof by 50% or more as a standard for the age and wear to the shingles.
• RCV is an acronym for “Replacement Cash Value” and means the total cost of replacing or repairing an item, before your deductible or any depreciation is removed. For instance, what you paid your contractor for your roof is the “RCV” of the roof. Your insurance company will pay ACV first, then release the depreciation to you once you’ve provided documentation that the repair or replacement has been completed.

When an insurance claim occurs, the goal of any property owner should be to be fully indemnified. Isn’t insurance to make sure you don’t suffer a significant financial loss on top of your time in suffering property damage? However, when an ACV policy is in force, policyholders will find, for example, that a $70,000 roof may be depreciated down to $35,000, less a deductible, and only receive a payment of $33,000. Even when repairs are completed, no further funds will be released, and a property owner will have to make up a high portion of funds.

So, which kind of policy do you have in place? Is it enough coverage? Is everything in place should the worst happen? Thankfully, Premier Claims is here to help. We provide FREE policy reviews and can help you ensure your property is fully protected. When the storm comes or the hail hits, you can rest assured you’re ready after working with Premier Claims and when allowing our advisors and adjusters to negotiate your claim.