Coverage explainer
Replacement cost vs actual cash value: the single most expensive setting on your policy.
The difference between RCV and ACV is rarely explained at point of sale, but it determines whether you get $20,000 or $5,000 for the same roof claim. Here's how it works and how to tell which one you have.
Replacement Cost (RCV)
Pays what it costs today to buy a new equivalent item or rebuild the structure new — no depreciation deducted. Usually paid in two parts: ACV up front, recoverable depreciation after you complete the work.
Actual Cash Value (ACV)
Pays RCV minus depreciation. The older the item, the lower the payout. A 15-year-old roof can be depreciated 50%–75% — meaning a $20k replacement nets you $5k–$10k after deductible.
The roof example everyone runs into
Hailstorm totals a 15-year-old asphalt roof. Replacement cost: $22,000. Deductible: $2,500.
With RCV
$19,500
$22k − $2.5k deductible, paid in two stages
With ACV (60% depreciation)
$6,300
($22k × 40%) − $2.5k deductible
Same damage. Same carrier. $13,200 different in your pocket.
Where ACV hides on your policy
Carriers have quietly moved roofs to ACV across most of the country over the last decade — even when the rest of the dwelling is RCV. Look for these phrases on your declarations page or endorsement list:
- "Roof Surfacing Loss Settlement Endorsement" — usually means ACV on roof
- "Cosmetic Damage Exclusion" — denies hail dents without functional damage
- "Personal Property — ACV" — contents paid at depreciated value
- "Roof Payment Schedule" — sliding scale by roof age
Frequently asked
What is the difference between replacement cost and actual cash value?
Replacement cost (RCV) pays what it costs today to buy a new equivalent item or rebuild the structure new. Actual cash value (ACV) pays RCV minus depreciation — so a 15-year-old roof, sofa, or laptop is paid out at a fraction of what it costs to replace.
Is replacement cost better than actual cash value?
For almost every homeowner, yes. RCV typically costs 10–20% more in premium but can pay out 2x–5x more on a partial loss. The exception is older items you'd replace cheaply anyway — but that calculation rarely favors ACV on big-ticket structures like roofs.
How do I know if I have RCV or ACV on my homeowners insurance?
Check your declarations page. The dwelling section will say 'Replacement Cost' or 'Actual Cash Value.' Then look for a separate roof endorsement — many carriers now apply ACV to the roof even when the rest of the dwelling is RCV. Personal property has its own RCV/ACV setting too.
What does ACV mean for my roof claim?
On a 20-year asphalt shingle roof with 15 years of wear, depreciation can be 50%–75%. A $20,000 roof replacement might net you $5,000–$8,000 after depreciation and deductible. With RCV, you'd get the $20,000 (minus deductible) once you actually complete the work.
How does the replacement cost holdback work?
With RCV, the carrier first pays the actual cash value. You complete the repair or replacement, submit receipts, and then they release the 'recoverable depreciation' — the difference between RCV and ACV. If you never replace the item, you only keep the ACV portion.
Do you have RCV or ACV? Find out free.
Upload your declarations page. We'll find your RCV/ACV settings on the dwelling, the roof, and personal property — and tell you what it means in dollar terms.
Related reading
General information, not legal or financial advice. Coverage and limits vary by carrier and state.