ACV and RCV are two different types of coverage that affect how much compensation a homeowner will receive for damaged or destroyed property.
ACV stands for “actual cash value,” which takes into account the replacement cost of the damaged property, less any depreciation. This means that the insurance company will provide compensation based on the value of the damaged property at the time of the loss, taking into account factors such as age and wear and tear.
On the other hand, RCV stands for “replacement cost value,” which is the amount it would cost to replace the damaged property with new items of similar kind and quality, without accounting for depreciation. This means that the insurance company will provide compensation based on the full cost of replacing the damaged property with new items.
What normally happens is that your insurance will pay you the depreciated value up front (the ACV amount), then as you begin to replace your damaged items and submit receipts to your insurance company, they will pay you the withheld depreciation. Here is an example:
Your TV has a replacement cost of $600 and an ACV value of $300. Your insurance company will send you a check for $300 up front. Then, once you’ve replaced the TV with a new one and send in the receipt to your insurance company, they will reimburse you for anything you spent over the $300 ACV up to $600. Let’s say you spent $589 for a new TV, your insurance company will reimburse you for $289. Clear as mud, right? Don’t worry, we’ll help you understand the process and answer all your questions.
If a homeowner has ACV ONLY coverage, they will receive compensation for the value of their damaged property after depreciation has been taken into account. If they have RCV coverage, they will receive the ACV (or depreciated value) up front, and then once they replace the item, they’ll be eligible to be reimbursed for the difference up to the agreed upon RCV amount.
It is important for homeowners to understand the difference between ACV and RCV when choosing their insurance coverage and when filing a claim. RCV coverage typically has higher premiums, but it will typically provide better coverage and higher compensation in the event of a loss.
