ACV vs. RCV: Which is the right value?
Understand the value estimates for your belongings
How will your insurance company pay a claim?
If you don’t have much experience reading and filing insurance claims, it’s very possible that you won’t fully understand the quotes you receive for your damaged items. In many cases, there are rows of numbers with different values without an abundantly clear indication of which value is the one you’ll be receiving.
Actual cash value (ACV) and replacement cost value (RCV) are two terms that confuse most people when it comes to insurance claims, though they’re very important. It’s not uncommon to assume that with any insurance policy, you’ll receive the full cost to repair or replace an item to its pre-disaster state. However, there are stipulations to affect whether or not that is the case initially.
What are my items worth?
The answer to this question depends upon the type of coverage you have. First, you’ll need to understand the distinct difference between ACV and RCV.
Replacement Cost Value (RCV) – RCV is the amount the item would cost to be repaired or replaced in today’s market.
Actual Cash Value (ACV) – ACV is the amount you would pay for a similar item today (or RCV), withholding depreciation.
In other words, ACV=RCV-Depreciation. Insurance companies often pay the ACV upfront, then provide a second check for depreciation once all repairs have been completed. Typically, documentation or proof of these repairs is required before the depreciation is paid.
Hopefully this information helps to clear up some confusion and makes you feel more confident in your restoration plans.