Glossary

What is Replacement Cost vs. Actual Cash Value?

Replacement cost pays to replace damaged property without deduction for depreciation; actual cash value deducts depreciation from the replacement cost.

Full Definition

Replacement Cost Value (RCV) and Actual Cash Value (ACV) are the two primary methods of valuing insured property at the time of a loss. RCV pays the cost to repair or replace damaged property with materials of like kind and quality without any deduction for depreciation. ACV pays replacement cost minus depreciation, resulting in a lower settlement. For example, a 10-year-old roof with a 25-year life destroyed by a storm: RCV pays the full cost of a new roof, while ACV deducts 40% for depreciation. RCV policies cost 10-15% more in premium but provide significantly better claim outcomes. UHNW clients should always insure on a replacement cost or agreed value basis.

Related Terms

Blanket Coverage

Scheduled Coverage

Coinsurance

Explore More

Related Coverage & Services

Commercial Property Insurance

Commercial property insurance covers buildings, equipment, inventory, and business personal property against physical loss or damage.

Blanket Coverage

A single limit of coverage that applies across multiple items, locations, or categories rather than scheduling each one individually.

Scheduled Coverage

Individual items are listed (scheduled) on the policy with specific values and coverage terms for each item.

Coinsurance

A policy provision that penalizes the insured for underinsuring property below a specified percentage of its actual value.

Personal Insurance

Business Insurance

Start Here

Have Questions About Replacement Cost vs. Actual Cash Value?

Our advisory team can explain how this concept applies to your specific situation and help you make informed insurance decisions.

Call (800) 755-3469

Discovery

We sit down with you and ask the questions most brokers never do — your assets, your family, your business, your goals.

Strategy

We map your full risk picture and design a coordinated program that strengthens coverage and reduces your total cost of risk.

Execution

We place your program with elite carriers and handle every detail — applications, underwriting, and transitions.

Ongoing Optimization

Your advisor reviews your program as your life evolves — new assets, new ventures, new exposures — so coverage never falls behind.