RCV vs. ACV
Your home is protected by dwelling coverage (also called “Coverage A”). The amount of dwelling coverage is usually based on the cost to rebuild your home. Most policies cover your home at RCV (Replacement Cost Value).
Your belongings are covered by “personal property” coverage on your policy. When insuring your property (meaning everything you own inside of your home and in storage), you can choose between ACV and RCV. Most insurance policies default as ACV (Actual Cash Value), but you can usually switch to RCV for an increased rate. For example, if you paid $10,000 for a new roof 10 years ago, and it was damaged by hail or wind, the RCV option would typically pay what it costs to replace your roof, which could be more or less than $10,000, minus your deductible.
Example of RCV Vs. ACV Insurance
You had your roof installed for $10,000 fifteen years ago, and now it’s worth $1,500. If it’s damaged in a claim, here’s what you’ll get:
Actual Cash Value
You’ll get $1,500 because that is your roof’s actual value after five years of depreciation.
Replacement Cost Value
You’ll get the value of a brand new roof (same materials), which could be more or less than what you originally paid.