Fortitude Public Adjusters Logo

ACV Versus RCV: What Are The Differences?

RCV vs ACV Insurance

When it comes to property insurance, there are three types of coverage available: actual cash value (ACV insurance), replacement cost value (RCV insurance), and guaranteed replacement cost (which is essentially an enhanced version of RCV). The three are often used interchangeably, but they’re not the same thing.

Both ACV and RCV policies will pay you the current value of your property, but they differ in how they calculate what your property is worth.

Here’s what you need to know about ACV versus RCV and what it means for you:

What Is Actual Cash Value?

Actual Cash Value (ACV) is the amount an insurance company would reimburse you for a damaged or lost item if you were to sell it in its current condition on the open market at the time of the loss.

ACV is calculated by calculating the item’s original cost and its depreciation over time. This means that it usually ends up being less than the item’s original purchase price because it doesn’t include the cost of repairs or replacements. Essentially, ACV might not provide you with the full amount needed to replace your damaged or lost items.

Let’s consider a practical example for better understanding. Suppose you bought a couch 10 years ago for $500. Over the years, the couch depreciated due to usage and wear and tear, and just before it was destroyed in a fire, it was worth $200. If your insurance policy covers ACV, it means your insurance company will only pay out $200, the actual cash value of the couch at the time of the incident. This is because the couch’s value has depreciated over time and isn’t worth as much as it was at the time of purchase. Therefore, with an ACV policy, you might end up bearing some out-of-pocket costs if you plan to replace the damaged item with a new one of similar kind and quality.

What Is Replacement Cost Value?

Replacement Cost Value (RCV) refers to the estimated cost to repair, replace, or rebuild damaged items to their pre-loss condition using new materials. This type of insurance coverage doesn’t account for any depreciation.

For instance, if a tornado damaged your roof and removed all of its shingles, an RCV insurance policy would cover the cost to replace the lost shingles with brand new ones, essentially restoring your roof to its state before the tornado.

Guaranteed (extended) replacement cost is essentially a more comprehensive version of RCV. It provides the same advantage of covering replacement expenses and safeguards against cost increases (surge charges).

RCV is most commonly used when damaged items need to be repaired or replaced. Unlike Actual Cash Value (ACV), which only covers the current market value of the property considering depreciation, RCV ensures that policyholders can reinstate their property to its original condition without worrying about any potential decrease in value over time. This makes RCV a more comprehensive coverage option, especially for properties with significant investment in fixtures and features.

Pros And Cons Of RCV And ACV

Type of PolicySame type of damage, ex: damage to a roofDepreciationDeductible for insurancePayment depending on policy
RCV$10,000n/a$1,000= $9,000
ACV$10,000$5,000$1,000= $4,000

RCV Pros: After a covered disaster, you may be able to replace your valuables with new versions of the same products. Following a covered loss, you may be able to reduce your out-of-pocket expenses.
RCV Cons: Increases your premium in comparison to ACV. Before you may be fully compensated for your covered claim, you may need to purchase replacement items.
ACV Pros: In general, coverage is less expensive than RCV coverage. If the majority of your personal belongings are relatively recent, this may be a more cost-effective option.
ACV Cons: Following a covered loss, higher out-of-pocket payments may occur.

Is AVC Or RVC Insurance Best For You?

Figuring out which coverage is best for you depends on many factors. An important one is how long you plan to stay in your home or keep your property.

If you plan to keep your property for several years, then RCV insurance may be a better choice than ACV because it helps replace the value and protect against rising home prices.
If you’re planning to sell soon, ACV may be better because it protects against falling home prices and gives you a price range immediately.

RCV may be more appealing because of the full cost to replace damaged property with a similar quality property but RCV coverage comes with higher premiums (which may be worth it in the long run).

When Can Public Adjusters Help With ACV Vs. RCV?

Insurance companies can often undervalue your property damage claims and utilize expensive claim adjusters to ensure they are getting the best profit. Claim adjusters sometimes (not always) exaggerate the depreciation of damaged property, especially when it comes to ACV coverage. Actual cash value = replacement cost – depreciation, so inflating depreciation can be beneficial to the insurance company.

Even though insurance companies are supposed to help you get the right amount for your claim, they are often challenging your claim to make sure they are only paying you the bare legal requirement they can get away with. This is why we are here to help.

Here at Fortitude Public Adjusters, we help you get the most out of your claim process. By working with us, we will help review and guide you through your policy to find out which type of coverage you have and how much in total you should be offered.

Whether you have ACV or RCV coverage, we will ensure a fair claim settlement for you. Get your FREE consultation today!

Share This Post

More To Explore