What is ACV and RCV?

Financial concept meaning Replacement Cost vs. Actual Cash Value with inscription on the page.

When a Florida storm hits and causes property damage, homeowners would like to rest easy knowing their homeowner’s insurance policy will pay the bill for needed repairs. Unfortunately, this is not always the case. To understand why filing an insurance claim for a damaged home might lead to difficulties in collecting payment from insurance companies, one must first understand these terms:

  • Actual Cash Value (ACV)
  • Replacement Cost Value (RCV or RV)

What is Actual Cash Value?

Florida homeowners may opt for an actual cash value (ACV) insurance policy because the premium will almost certainly be more affordable. Unfortunately, such policies tend to pay out less in the event of a claim. Here’s why:

Once the insurance company receives a claim on an ACV plan, the insurance company will calculate and then pay the actual cash value of the damaged property. However, there is no standard for determining the actual value, which is where things get complicated. Usually, insurance companies estimate value by determining the value of the property when the owner first purchased it and then subtracting depreciation. 

For example, a hurricane that destroys a roof that cost a homeowner $15,000 to have built ten years ago is not going to be a roof that is worth $15,000 today, at least not in the eye of the insurance company. The insurance company will attempt to depreciate the value of the roof and then pay the homeowner a reduced amount, perhaps $5,000, since the roof is ten years old and is no longer worth $15,000. (Bear in mind, the homeowner must still replace their roof, which will still cost $15,000 or more).

What is Replacement Cost Value?

The replacement cost value is a far simpler (albeit slightly more expensive) type of insurance. Under a replacement cost value policy (RCV or RV), the insurance company must pay the full cost of replacing the damaged property. 

But even under this system, insurance companies may try to get out of paying. For example, suppose the insurance adjuster determines that a roof damaged by a hurricane was already in disrepair before the storm. In that case, the insurance company will attempt to void its responsibility in paying. Even a gold-standard insurance policy with a hefty premium is not a guarantee that damaged property will be easily, fairly, and quickly reimbursed by the insurance company.

Magazine & Light Law Group Can Help

Magazine & Light Law Group is a boutique legal firm that specializes in helping people achieve justice against powerful corporations and entities. Our legal team applies a one-on-one approach that makes each client the focal point of every case we preside over. If your insurance company is trying to deny your claim or offer you a compensation package far lower than what you feel is fair, contact our law office today at 727-499-9900.

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James (Jim) Magazine is a Florida Board Certified Civil Trial lawyer who has spent his career helping injured victims. Jim is licensed to practice law in the State of Florida since 1990 and is also admitted to practice at the Appellate level and admitted to the United States Supreme Court.