Dwelling insurance reimburses you for losses caused by covered events. Depending on the claim

type, your insurer will calculate the cost of replacing or repairing your property by looking at its

actual cash value (ACV) or replacement cost value (RCV). Claim payments related to the

physical structure of your home are typically based on RCV. Personal property claim payments

may use either ACV or RCV, depending on the policy.

What is Actual Cash Value (ACV) Coverage?

Actual cash value coverage yields claim payments based on the property’s current estimated

value, so your payment will be reduced to account for depreciation and normal wear and tear. It

typically applies to the personal property part of your dwelling policy.

What is Replacement Cost Value (RCV) Coverage?

Unlike ACV coverage, replacement cost value does not account for depreciation or wear and

tear. Instead, it reimburses you based on how much it would cost to replace, repair, or rebuild

your property at current prices.

What is the difference between ACV and RCV coverage?

While ACV typically applies to personal property, RCV can be applied to both dwelling and

personal property. The big difference is that ACV considers the depreciation of lost or damaged

items, while RCV does not.

How does ACV work?

Say your personal property policy uses ACV to settle claims, and your television, which you

purchased for $1,000, is ruined by a power surge. If your insurer concludes its value has

depreciated by half since your purchase, you will receive $500, minus any deductible.

How does replacement cost value work?

Say your dwelling policy uses RCV to settle claims, and your house is destroyed by fire. Your

policy has a $500,000 coverage limit, but your total rebuilding cost is estimated at $510,000.

You will be responsible for the amount that exceeds your coverage, as well as any deductible.



We hope this article helps demystify ACV versus RCV. If you have any additional questions,

please feel free to Call, Click or Come by. We’re always here to help.

Rising Star Insurance Group

Protecting What Matters Most to YOU for over 40 Years

Source: https://www.usnews.com/insurance/homeowners-insurance/actual-cash-value-vs-replacement-cost