ACV vs. RCV: What Homeowners Need to Know About Insurance Payouts
- David Reyes
- 7 days ago
- 2 min read
When disaster strikes, the last thing you want to worry about is whether your insurance will actually cover the full cost of repairs. That’s why understanding the difference between Actual Cash Value (ACV) and Replacement Cost Value (RCV) is so important. These terms determine how much you’ll get from your insurer after a loss—and they can significantly affect how much you pay out of pocket.
What Is Actual Cash Value (ACV)?
ACV is the amount it would take to replace or repair your damaged property minus depreciation. Depreciation reflects wear and tear, age, and usage.
Example:If your 10-year-old roof is damaged, your insurance payout under ACV would be the cost of a new roof minus the value lost over those 10 years.
What Is Replacement Cost Value (RCV)?
RCV is the cost to repair or replace the damaged property without factoring in depreciation. It aims to restore your home or belongings using similar materials and quality, regardless of age.
However, many insurance companies:
Pay out the ACV first,
Then reimburse you for the difference up to the RCV—once you complete the repairs and submit receipts.
Key Differences: ACV vs. RCV
Feature | ACV | RCV |
Depreciation Deducted? | Yes | No |
Payout Timing | Paid once | Often split into two payments |
Premium Cost | Lower | Higher |
Coverage Level | Less comprehensive | More complete |
Items That May Be Limited to ACV (Even With RCV Coverage)
Even if you have RCV coverage, some property may still only be reimbursed at ACV:
Older or poorly maintained roofs
Certain building features like fencing, awnings, or carpet
Personal property such as antiques, collectibles, or obsolete electronics
Always review your policy for item-specific coverage details.
Which Is Right for You?
Choosing between ACV and RCV depends on your:
Budget: RCV premiums are higher, but coverage is more complete.
Willingness to risk: ACV could mean higher out-of-pocket costs after a claim.
Home’s age and condition: Older homes or items may lose significant value under ACV.
Before deciding, talk to your insurance agent and make sure you fully understand what’s covered—and what isn’t.
Final Thoughts
Knowing whether your policy pays ACV or RCV can help you avoid surprises and make smarter decisions about your coverage. If you’re unsure, request a policy review or schedule a free property damage assessment with our team. We’re here to help you get the answers you need before you ever have to file a claim.