RCV vs ACV - Whats the Difference?

RCV vs ACV  - Whats the Difference?

Wind and hail storms have been increasing in frequency of the past several years. Some insurance companies have begun offering to cover roofs for Actual Cash Value (ACV) rather than Replacement Cost Value (RCV). This may seem attractive because of the lower premium amount. However, it may catch off guard at the time of a claim.

If you happen to live in an area where roof damage from windstorms and hail is prevalent or possible, the decision you make about this coverage could mean the difference between paying out just your homeowners deductible or your deductible plus depreciation costs.  The difference could amount to thousands of dollars depending on the age of your roof.

Difference between ACV and RCV.

If your policy is ACV, your insurance company will pay the actual cash value of your roof at the time of a covered loss. This means the actual cash value minus your deductible amount minus the depreciation cost according to the age of your roof.

A policy with RCV, your insurance company will pay the replacement cost value of your roof at the time of a covered loss minus your deductible with no depreciation on the value. 

Here is an example to help explain the difference. Assume Smith and Doe are neighbors, the same type of house, constructed same year, with the same roof, and both have the same type of damage done 10 years later.

With the above example, Doe will receive $14,000 from his insurance company whereas Smith will only receive $4,000. The difference is depreciation. The older the roof, the more deducted for depreciation and less paid out by the insurance company.

Insurance valuation methods can be confusing and difficult to determine based on your individual needs and circumstances. For the best outcome, don’t’ go it alone when making important decisions that could end up costing you thousands in the end. Speak with a local, hometown independent insurance agent about what type of roof valuation method is best for your situation. Your independent agent will review your existing policy and help you identify coverage issues that might impact your finances in the event of any loss. An independent insurance agency knows the right questions to ask to make sure you’re properly and adequately covered for an appropriate price.

Contact your local independent agent today for trusted, expert insurance value 1-248-682-0077.