What is ACV, RCV, and Depreciation?

Posted: February 18, 2013

After you file a claim, you will receive an estimate from an insurance claims adjuster of your carrier to bring the property back to the condition it was previous to the damage or loss.

This is somewhat “standard” of insurance practices. However, all insurance companies are different and there are a variety of practices within the industry. Within this particular practice, there are two methods of compensating you to bring you to a “pre-loss condition.” The first is to pay the Replacement Cost Value (RCV) and the second is to pay you Actual Cash Value (ACV). The difference between the two is called depreciation.

As things get older they generally lose value over time. We take advantage of this when we depreciate property at tax time. Unfortunately, when we file a claim, the insurance company takes advantage of this. Though your home itself may actually appreciate, the building components used to construct the home are deteriorating from age and lose value, a.k.a. depreciate.

When your adjuster comes out to settle your claim, they will prepare an estimate of damages and an estimate of value of your contents, then subtract your deductible as well as deduct the value of depreciation. Depreciation value is often determined by the Property Loss Research Bureau which is a third party organization that performs all research related to insurance claims and loss. Typically, insurance companies follow their standards.

How this applies to you.

If you have an ACV policy, you get your check and that’s it. Once depreciation is deducted and you get the actual cash value, the claim is considered settled. You have to come up with the actual amount to do repairs on the property and replace contents.

However, if you have an RCV policy – you’re in a much stronger position. In an RCV policy, you typically get your actual cash value check when the adjuster first comes out or it is sent to you after the adjuster’s estimate is compiled. You then get a second and final check that covers the difference between ACV and RCV. This will occur after Vivax Pro Roofing has completed the necessary repairs on the property and you are happy with all of the completed work. Vivax will then send out an itemized invoice to the homeowner which will need to be re-directed to the insurance carrier. Please contact us with any questions you may have about the insurance process. Vivax Pro Roofing is here to help!