Q16. Actual Cash Value (ACV) and Replacement Cost Value (RCV), what is the difference?

Most basic property insurance policies state that losses will be settled on either an ACV or RCV basis. What is the difference? ACV is the cost to replace an item of property, less an allowance for depreciation. RVC is the cost to replace an item of property without deducting depreciation due to age or condition. It is important that you understand the valuation type for each policy you hold. If you have insurance with us, feel free to call and we will check for you.

More Information:

In general, homeowner policies provide RCV for dwellings coverage and ACV for contents coverage. Most homeowner policies can have an endorsement added (Personal Property Replacement Cost) so that your contents will be valued at RCV rather than ACV. The additional premium varies from company to company, but we feel it is a good coverage to have and always recommend this endorsement.

Flood policies generally provide RCV for dwellings that are primary residences and ACV if the dwelling is a secondary, seasonal, or rental property. Flood covers contents at ACV. There is no endorsement available to increase the coverage of contents from ACV to RCV in a flood policy.

Wind policies generally cover houses at RCV and contents at ACV. If you carry full contents coverage (50% of the building coverage) then an endorsement is available to increase the contents coverage to RCV.

Mobile homes and manufactured homes are covered a bit differently. Most companies will replace with "like kind and condition" or in the case of a total loss, 100% of the stated value of the policy. Wind policies value mobile homes and manufactured homes at ACV rather than RCV.

This chart may make this information a bit less confusing:

These are general rules of thumb. They may vary from company to company.