Buyer Beware: Actual Cash Value vs. Replacement Cash Value

What Gives?

While roofs are designed to last for a good while, it’s inevitable that “acts of God,” as the insurance companies like to say, cause wear and tear. When this happens, you generally call your insurance company, discuss your homeowner’s policy, and get the ball rolling on repairs. If you have roof insurance, chances are, you’ve either chosen Actual Cash Value (ACV) or Replacement Cash Value (RCV) coverage. Both will come to your rescue, but in different ways. It’s important to know the difference. Here’s the scoop.

What is ACV?

Actual Cash Value roof coverage means that your insurance company will pay you for the value of your roof in its current state. This amount is determined by your friendly neighborhood claims adjustor who stops by, inspects your roof, reviews the condition, and gives you a guestimate on how much longer it will last. 

But here’s what you need to know: This kind of coverage is typically used for older roofs or those that are in poor condition. Granted, some insurance companies will give you a choice between ACV and RCV, but some have their own guidelines. And there are even some states that don’t allow ACV or only allow ACV. You’ll have to check your state. Lastly, ACV is usually the less expensive option.

What is RCV?

Replacement Cash Value means that when/if you need repairs, an insurance company will pay you what it would costs to replace your roof with a comparable new roof. Your friendly neighborhood claims adjustor would base their numbers on brand new materials that are similar to what you currently have. 

This kind of coverage generally costs more than ACV. But it also means that your deductible could be your only out-of-pocket cost. If you have a new(er) roof, you may be able to replace the whole thing with RCV coverage. Sometimes insurance companies automatically assign RCV, while others give you a choice between RCV and ACV. Like we said, it depends on the age of your roof and the insurance company guidelines.

Which one is better?

This answer depends on your personal situation, (specifically, financial), the age and condition of your roof, and the particulars of your insurance company.

Simply put, ACV is generally cheaper. You won’t pay out the nose. However, if you do choose ACV, keep in mind that you’ll most likely pay more out-of-pocket expenses after a claim since this kind of policy doesn’t cover the depreciation of your roof. If you’re one who keeps a savings account for emergencies, this is your best bet.

RCV is more expensive. If you have the means, RCV might be a better choice. It gives you a higher level of protection in terms of replacement costs and repair after those acts of God like, for instance, wind or hail damage.

No matter what you choose, Peak is here to work with you and your policy. We actively listen to your needs and wants. And we promise to exceed your expectations, each and every time. In fact, we build integrity into everything we do.

Remember, we’re always here for you. And just a phone call away.

Jeff Riss,
President, Peak Roofing & Construction