Actual Cash Value (ACV)
The payment amount insurance companies offer for damaged property, calculated as replacement cost minus depreciation.
How ACV Works
Insurance companies apply depreciation (usually 5-10% per year) to the replacement cost of materials. The older your roof, the less you get paid.
A 15-year-old roof worth $12,000 to replace might only get $7,000 under ACV because the insurance company assumes it's already 75% of its life span used up.
ACV vs. Replacement Cost Value
With ACV, you pay the difference out of pocket. You want RCV (Replacement Cost Value) coverage, not ACV. RCV covers the full cost of replacement without depreciation deduction.
Check Your Policy Now
Open your homeowners policy and search for "ACV" or "Actual Cash Value." If that's what you have, call your agent and ask about switching to RCV. It costs more in premiums but saves thousands when damage happens.