Replacement Cost vs. Actual Cash Value

When something you own is damaged or destroyed, how much your insurance pays depends on one key policy detail: replacement cost (RCV) versus actual cash value (ACV). Actual cash value pays what the item was worth after depreciation — so older items mean smaller checks. Replacement cost pays to replace it with a new, similar item. The same principle applies to roofs and entire homes, where the difference can be thousands of dollars on a single claim.

Payout methods, depreciation calculations, and available options vary by policy and carrier. This video explains the concepts in general terms only; review your own policy or speak with an agent about which valuation method applies to your coverage.