Actual Cash Value (ACV) versus Replacement Cost (RC)

When shopping for insurance, homeowners can usually choose between Actual Cash Value (ACV) and Replacement Cost (RC) on your contents coverage, which covers your personal property in the home (furniture, kitchen items, clothing).

On a dwelling policy, which is designed for rental/investment properties or vacant/rehab homes, depending on the policy type, DP1 or DP3, will depend on if you have replacement cost.  Either policy type could come with ACV on the home/dwelling coverage and personal property. 

As its name suggests, Replacement Cost covers the cost to replace your items with comparable, new items so an old TV is replaced with a new like size TV.  ACV covers an item at a depreciated value so old TV replaced for old TV.  ACV takes the cost of the item new then deducts for depreciation.

For example, if your five year old TV is destroyed in a fire, Replacement Cost would cover the cost to replace it brand new for a like size TV.  ACV would reimburse for the value of the TV minus 5 years of depreciation so you might be able to buy a used TV at that payout.  For most items, the older they are the lower their actual cash value payout will be. 

Although Replacement Cost provides more comprehensive coverage, it also comes with a price as insuring for Replacement Cost costs more then insuring for ACV.  

We typically do not recommend insuring at ACV however some older homes, or damaged homes, that may be the only option.  

Make sure you know your policies coverage and if unsure contact your agent and work with your agent to determine what choice is best for you and your home.