Insurance Claims: ACV, RCV, Depreciation and Deductibles


It’s a month after a hail storm, your roof has been totaled and your adjuster sends you a long document listing hundreds of quantities and prices. If you’re an insurance claim newbie, figuring out what it all means can be frustrating. To fully understand the document you should talk to your agent and your roofer, but these terms will help you find what you will need to pay, and what payments you should expect from your insurance company.

First, find the biggest dollar amount listed in the documents. This is the RCV. You will most likely find this number on a summary page at the beginning or end of the claim document. You will also see terms like Depreciation, Deductible, and ACV.

It may look something like this:

  • RCV: $10,000
  • Depreciation: ($ 5,000)
  • ACV: $ 5,000
  • Deductible: ($ 2,000)
  • Net Claim: $ 3,000 (first payment to homeowner)
  • Recoverable Depreciation: $ 5,000. (second payment to the homeowner)
  • Total payout if Depreciation is recovered $ 8,000

What Is RCV?

RCV or Replacement Cost Value is the cost to completely replace the damaged property to a like new condition. The RCV is what a contractor would charge to you (the homeowner). ACV and Depreciation are added together to find the RCV. ACV+Depreciation=RCV

What Is ACV?

ACV or Actual Cash Value, is the dollar amount associated with the remaining life left in the property, had the damage never occurred. Depreciation is the dollar amount associated with the life of the property that has already been used.

When you add the life used and the life left, you arrive at the Replacement Cost Value. Most homeowners have an RCV policy because it provides the most coverage. If you happen to have an ACV policy, you will only be owed the ACV, and will not receive any Depreciation.

Unless you decide to upgrade products, under an RCV policy, you should only have to pay your deductible. This is the amount you are required to pay should your property be damaged. The first payment you receive will be the ACV minus your deductible.

Your second payment is for the depreciation. You will only receive the depreciation once the work is completed. Initial Payment = ACV - deductible. Second payment = Depreciation

This is a simple example and often there are other factors at play. If you’re ever having trouble navigating an insurance document, call us and one of our experienced roofing specialists can help you take the first steps to repairing your property.

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