RCV vs. ACV: UNDERSTANDING THE KEY DIFFERENCES

If your roof is 10 years old and the cost to replace it is $20,000, an RCV policy would provide coverage for the full replacement cost of $20,000, without reducing the payment based on the roof's age or condition.

Actual Cash Value (ACV) takes depreciation into account when determining the value of damaged property. Rather than paying the full replacement cost, the insurance company pays the property's current value at the time of loss, reflecting age, wear and tear, and depreciation.

Because ACV coverage generally results in lower claim payments, it is often available at a lower premium cost than RCV coverage.

• RCV: Does not consider depreciation and covers the full cost to replace damaged property.
  
• ACV: Applies depreciation and pays the property's current market value, which is typically less than the replacement cost.

If a $20,000 roof sustains the same covered damage under both coverage options:

• RCV: You would receive $20,000 to replace the roof.
• ACV: You would receive approximately $14,000 after depreciation is applied.

WHICH OPTION IS RIGHT FOR YOU?

• RCV is generally ideal for homeowners seeking broader protection and who do not want depreciation to reduce their claim settlement.
• ACV may be appropriate for those who prefer a lower initial insurance cost and are comfortable assuming a greater share of replacement expenses following a covered loss.