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What is the difference between an ACV and an RCV insurance policy for my home?

Updated: Jan 18, 2022

Avoid insurance claims horror stories (ARES Restoration Claim Questions #2): Knowing the difference between ACV and RCV policies

There are two primary policy types for property insurance and it is important to know the difference between actual cash value, also known as ACV, and replacement cost value, also known as RCV. In the event that you have water or fire damage claims for your home or business, you will want to know what policy type you have and what that will mean for you at the time of the insurance claim.

What is the difference between an ACV and an RCV insurance policy for my home?

The two primary policy types for property insurance include:

  • Actual Cash Value (ACV)

  • Replacement Cost Value (RCV)

Actual Cash Value (ACV)

Actual Cash Value homeowner insurance policies according to insurer Liberty Mutual are, “What you would pay to repair or replace the item at today’s cost minus the depreciation.” Depreciation (stay tuned for our next blog post) is a factor that reduces the payout for a given item based upon its age, use, and/or condition. For example, if your carpet was damaged by water and needed to be replaced, if you have an ACV policy, the adjuster will likely factor in the age and use of your existing carpet in the claims settlement.

Value of the item - depreciation = estimated payout for replacement

Exhibit 2 - Graphic from Office of Public Insurance Council -

Replacement Cost Value (RCV)

Replacement Cost Value homeowner insurance policies according to insurer State Farm, “Is the cost necessary to repair or replace your entire home. When you insure your home for its estimated replacement cost, your insurer will reimburse you (subject to your policy limits) for the cost of rebuilding or repairing your home, based on the size and structure of the home that was lost or damaged.”

Previously we posted a blog and video for Claim Questions Tip #1 - Keep Good Insurance Claims Notes. In our upcoming ARES Claim Questions blogs and videos, we will dive further into the details of:

  • Depreciation

  • How a fair and reasonable replacement cost value is determined.

We are not insurance claims policy experts but as restoration contractors, we have “seen a thing or two,” to borrow a claims phrase from an insurance advertisement. We want to help you avoid insurance claims horror stories. Consider these items that we bring up in our series on insurance claims questions and review them with your local insurance agent.

ARES Restoration is a licensed, bonded, and insured general contractor based in Puyallup, Washington that specializes in the insurance claims process. Serving Pierce County residents and business owners with their insurance claim repairs. Our motto is, "Giving You Back Your Home." Contact us today about your damage repairs.

DISCLAIMER: This is NOT insurance advice. We are not agents, adjusters, or qualified to comment on insurance policies.

Video created by The DYOJO

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