Replacement Cost vs. Actual Cash Value
A guide to understanding how insurers calculate payouts for property damage.
When choosing property coverage, homeowners must select how claims for structure damage and personal items will be settled. Insurers generally utilize two different calculation structures: Replacement Cost Value (RCV) and Actual Cash Value (ACV).
Replacement Cost Value (RCV)
Replacement Cost pays the amount required to repair or replace damaged property with materials of comparable quality, without any deduction for physical wear and tear.
- No Depreciation: The insurer pays the actual market price to buy a new item or build a structure today.
- Stable Payout: Helps ensure you can afford to rebuild your home completely after a major loss.
- Cost: Premiums are higher because the potential payout is significantly larger.
Actual Cash Value (ACV)
Actual Cash Value settles claims based on the depreciated value of the property at the time of the loss.
- Depreciation Deducted: The insurer calculates current replacement cost and subtracts an amount based on age and wear.
- Lower Payout: If a 10-year-old television is destroyed, you receive the estimated value of a 10-year-old TV, not the cost of a brand new model.
- Cost: ACV policies are cheaper but leave you responsible for bridging cost differences to buy new items.
There are currently no direct referral partners available for this line of coverage in your region. We recommend researching reputable local carriers or discussing with a licensed professional to compare options.