Insurance can feel like a different language sometimes, and one of the biggest head-scratchers is how much you'll actually get paid if you ever file a claim. Most people assume their insurance will simply cut them a check for whatever they need to replace a damaged item, but that’s not always the case. The difference between Replacement Cost (RCV) and Actual Cash Value (ACV) could mean thousands of dollars—so let’s break it down in a way that actually makes sense!

What Is Actual Cash Value (ACV)?

Think of ACV as the garage sale price of your belongings. It takes into account depreciation, meaning your insurance company looks at how old your item is and calculates what it's worth today—not what you originally paid for it.

🔹 Example: Your couch was $2,000 when you bought it five years ago. But because of normal wear and tear, your insurance may now value it at just $800. If it’s damaged in a covered claim, you’ll get a check for $800—not enough to buy a brand-new couch.

What Is Replacement Cost (RCV)?

RCV, on the other hand, is like getting a full-price gift card for whatever you need to replace. This means your insurance company will cover the cost to replace your damaged or stolen item with a brand-new one of similar kind and quality—without subtracting for depreciation.

🔹 Example: Using the same couch scenario, with RCV coverage, you’d get the full $2,000 it takes to buy a new one, rather than just the depreciated value.

Why Does This Matter for Homeowners Insurance?

If you have ACV coverage, you might get a shockingly low payout after a claim. Roofs, furniture, and appliances all lose value over time, and if your policy only pays ACV, you could end up paying thousands out of pocket to replace what was lost. RCV coverage costs a little more in premiums, but it ensures that if the unexpected happens, you’ll be able to replace what you lost without financial stress.

How Do You Know Which One You Have?

The best way to find out? Check your policy or ask your agent! (That’s us—we’d love to help!) If you’re not sure whether your home, belongings, or even your car are covered under ACV or RCV, it’s worth a quick review to make sure you’re set up for success.

Need help reviewing your coverage? Let’s chat! Office Phone: 971-303-3411