Actual Cash Value vs. Replacement Cost: The fine print on your policy.
If your 8-year-old roof or 5-year-old television is destroyed, ACV pays what a used, depreciated item is worth on Craigslist. Replacement Cost pays what it costs to buy a brand new one today.
WHAT IS THIS?
In homeowners and renters insurance, policies calculate payout under one of two core valuation standards: Actual Cash Value (ACV) or Replacement Cost Value (RCV).
Actual Cash Value deducts depreciation for age, wear and tear before writing you a check.
Replacement Cost Value pays the actual cost required to replace damaged property with brand new materials of like kind and quality at current market prices.
WHY SHOULD I CARE?
Many budget insurance policies default to ACV for personal property or roof endorsements to advertise a lower monthly premium.
WHAT SHOULD I DO?
Open your homeowners or renters insurance Declarations Page. Check Section C (Personal Property) and Roof Endorsements for the letters 'RCV' or 'ACV'.
WHAT TO DO NEXT
ACTION RULEYOUR 5-MINUTE CHECKLIST:
- Find your policy declarations page.
- Confirm personal property has RCV coverage.
- Take a 5-minute video walkthrough of every room in your home and store it on cloud storage.
“Never accept ACV for personal property on a homeowners or renters policy unless financial constraints leave you zero alternative.”
- •Understanding Property Valuation Methods(National Association of Insurance Commissioners (NAIC))
- •Property Claims Settlement Standards(Insurance Information Institute)
HOW MUCH OF ADULT LIFE CAN YOU HANDLE WITHOUT GOOGLING IT?
Download The “I Should Probably Know This” Checklist. 50 things every adult should know how to find, check, understand, or do across Money, Cars, Home, Life Admin, and Preparedness.
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