If your roof is 10 years old and replacing it costs $20,000 with RCV you would receive that amount, without considering its age.
RCV vs ACV: UNDERSTANDING KEY DIFFERENCES
REPLACEMENT COST VALUE (RCV) vs ACTUAL CASH VALUE (ACV): WHAT’S THE DIFFERENCE?
At MOK INSURANCE, choosing the right coverage for your home is key to your peace of mind. Below, we explain the difference between both:
REPLACEMENT COST VALUE (RCV): PROTECTION WITHOUT DEPRECIATION
RCV guarantees that the insured will receive the necessary amount to replace their damaged property, without considering depreciation. This means the insurer will cover the full replacement cost, regardless of wear and tear or age.
RCV Example:
ACTUAL CASH VALUE (ACV): COVERAGE WITH DEPRECIATION
ACV considers the depreciation of the insured property. The insurer will pay the current value of the property, accounting for wear and tear and age, resulting in a lower amount than the replacement cost.
ACV is often a more economical option in terms of premiums.
ACV Example:
If your roof is 10 years old and has lost 30% of its value, ACV would pay you $14,000 rather than the $20,000 it would cost to replace it.
COMPARISON BETWEEN RCV AND ACV:
- RCV: Does not account for depreciation and covers the full replacement cost.
- ACV: Takes depreciation into account and pays the current value of the property, which is less than the replacement cost.
Comparative Example:
If your $20,000 roof suffers the same damage in both cases:
- RCV: You will receive $20,000 to replace the roof.
- ACV: You would receive $14,000 accounting for depreciation.
Which Option to Choose?
- RCV is ideal for those seeking complete coverage and who do not want to worry about depreciation.
- ACV is suitable for those who prefer a lower initial cost option, with lower premiums.
At MOK INSURANCE, we are committed to helping you choose the coverage that best suits your needs. Contact us for more information and to protect what matters most.