ACV vs RCV (Actual Cash Value vs Replacement Cost Value)

Actual cash value (ACV) pays the amount needed to replace a damaged item minus depreciation for its age and wear. Replacement cost value (RCV) pays the dollar amount needed to replace the item with one of similar kind and quality, without subtracting for depreciation. The Insurance Information Institute gives the example of an eight-year-old washing machine damaged by a fallen tree: an RCV policy covers a new machine, while an ACV policy pays only the machine’s depreciated value. Many policies pay ACV first and release the depreciation amount, known as recoverable depreciation, after the homeowner completes the repair and submits proof.