ACV vs. RCV: How Your Insurance Policy Pays for a New Roof
ACV vs. RCV: The Short Version
Short answer: Replacement cost value (RCV) coverage pays what it costs to repair or replace your roof without subtracting depreciation. Actual cash value (ACV) coverage pays the depreciated value of your roof, so an older roof gets a smaller check. Either way, your deductible comes out. On the same roof claim, the difference can be thousands of dollars out of your pocket.
After the October hail and wind storms in Arizona, many homeowners are dealing with roof claims. Too many of them will not find out how their policy actually pays until the first check arrives, and that is not the time to learn the difference between ACV and RCV.
PRQ Exteriors is a BBB-accredited, Inc. 500 roofing company with a team of insurance experts who help homeowners through roof claims. This guide explains how each type of coverage pays, what recoverable depreciation means, the fine print that catches people off guard and how to check your own policy before you need it.
What Are ACV and RCV?
Replacement cost value (RCV) coverage pays the cost to repair or replace your damaged property with materials of like kind and quality, without deducting for depreciation, according to the National Association of Insurance Commissioners (NAIC).
Actual cash value (ACV) coverage pays the depreciated cost to repair or replace your damaged property. In other words, ACV is the replacement cost minus depreciation.
What is depreciation? Depreciation is the value your roof loses as it ages and wears. The NAIC explains that insurers usually calculate it based on the condition of the property when it was damaged, what a new one would cost and how long it would normally last. A 15-year-old roof will usually be depreciated much more than a 3-year-old roof, even if both were damaged by the same storm.
|
Replacement cost value (RCV) |
Actual cash value (ACV) |
|
|---|---|---|
|
What it pays |
Cost to repair or replace, without subtracting depreciation |
Depreciated value of the roof |
|
How age affects your payout |
Minimal, once the work is done |
Older roof, smaller payout |
|
Typical payment |
Paid in two parts: ACV first, then held-back depreciation after work is completed |
Usually one payment |
|
Premium |
Usually higher |
Usually lower |
|
Out-of-pocket cost after a claim |
Usually just your deductible |
Your deductible plus the depreciation |
ACV vs. RCV Example: Same Roof Damage, Very Different Checks
The NAIC uses a simple example to show how big the gap can be. Two families, the Smiths and the Johnsons, have the same $15,000 in roof damage and the same $1,000 deductible. The Smiths have RCV coverage, and the Johnsons have ACV coverage.
|
Family |
Coverage |
Damage |
Depreciation |
Deductible |
Insurance pays |
|---|---|---|---|---|---|
|
Smith |
RCV |
$15,000 |
Not subtracted |
– $1,000 |
$14,000 |
|
Johnson |
ACV |
$15,000 |
– $10,000 |
– $1,000 |
$4,000 |
Source: NAIC
Same storm, same roof damage, same deductible, but the Johnsons are left covering $11,000 of the repair on their own. The older the roof, the more depreciation an ACV policy subtracts, and the bigger that gap gets.
Recoverable Depreciation: How the Second Check Works
What is recoverable depreciation? It is the part of an RCV claim your insurer may hold back at first and pay after the repairs are completed. As the Insurance Information Institute explains, if you have replacement cost coverage, your insurer will pay the actual cash value first (The Zebra).
Here is how a typical RCV roof claim is paid:
- The adjuster estimates the full replacement cost of the covered damage.
- You receive the first check: the replacement cost minus depreciation and your deductible.
- Your roof is repaired or replaced.
- You send proof the work is done, usually the final invoice or receipt from your roofer.
- You receive the second check for the recoverable depreciation that was held back.
Example: Say your roof's replacement cost is $20,000, the insurer applies $8,000 in depreciation and your deductible is $2,000. With RCV coverage, your first check might be $10,000, and the remaining $8,000 is paid after the work is done. With ACV coverage, that $8,000 is usually not recoverable, so the payout stops at $10,000.
Watch the deadline. Insurers often set a time limit for completing repairs and documenting them, and if it passes, the right to recover depreciation can expire (The Zebra). Ask your adjuster for the exact deadline as soon as your claim is approved. If you need more time, United Policyholders notes that most time frames can be extended if you request it in writing (United Policyholders).
The Fine Print That Catches Homeowners Off Guard
Even with RCV coverage, a few policy details can shrink your roof payout:
- Roof-only ACV coverage. Some insurers have moved toward covering roofs at actual cash value instead of replacement cost, even when the rest of the home has RCV coverage. Some provide a roof payment schedule up front showing how much they will pay based on the roof's age and material (United Policyholders).
- Separate roof or wind/hail deductibles. The NAIC notes that some policies have separate deductibles for wind or hail damage, or special deductibles that apply to certain parts of the home, like the roof.
- Wind and hail exclusions. Some policies exclude wind and hail coverage altogether, according to the NAIC, which may mean buying a separate policy.
- Spending less than the estimate. If the work is completed for less than the estimated replacement cost, depreciation is usually only released up to the amount actually spent.
- Downgrading materials. Using lower-grade materials or reducing the scope of work can limit the depreciation you get back, since many policies require repairs of like kind and quality (The Zebra).
Deductibles: Flat Dollar vs. Percentage
Your deductible comes out of your roof payout whether you have ACV or RCV coverage, so it is worth knowing exactly which kind you have.
- Flat-dollar deductible: A set amount, like $1,000, that you pay before coverage kicks in.
- Percentage wind/hail deductible: A percentage of your home's insured dwelling value. According to the Insurance Information Institute, these typically range from 1 to 5 percent (United Policyholders).
How a percentage deductible adds up: If your dwelling coverage is $200,000 and you have a 1 percent wind/hail deductible, you would pay $2,000 out of pocket on a wind or hail claim. At 2 percent, that becomes $4,000.
In Arizona: Insurify data puts the average wind and hail deductible in Arizona at about 1.07 percent of dwelling coverage, or roughly $3,508 (Insurify).
Tip: Convert your percentage into a dollar amount using your current dwelling coverage. That number, not the percentage, is what you would actually pay after a hail or wind claim.
How to Check Which Coverage You Have
How do I know if my roof is covered at ACV or RCV? Look at your policy's declarations page and any roof-related endorsements, or ask your agent directly. The best time to check is before you need to file a claim.
Ask your insurance agent these questions:
- Is my roof covered at replacement cost or actual cash value?
- Is there a roof payment schedule or age-based limit on my roof coverage?
- Do I have a separate wind/hail deductible? If so, what is it in dollars?
- How long do I have to complete repairs and claim recoverable depreciation?
- What documentation do you need to release recoverable depreciation?
- Would a roof upgrade, like impact-resistant shingles, change my premium or coverage?
If you are shopping for a policy: ACV coverage usually costs less up front, but it can leave you paying much more after a claim, especially as your roof ages. Compare the premium savings against what you would pay out of pocket on a roof claim.
Where to Get Help in Utah and Arizona
If you have questions about your policy or a dispute with your insurer, your state insurance department can help. These are government agencies, not insurance companies.
Utah: The Utah Insurance Department has staff available to help you understand your coverage and answer questions. Call (801) 957-9200 in the Salt Lake City area or 1-800-439-3805 toll-free in Utah, Monday through Friday from 8 a.m. to 5 p.m. You can also file a complaint through its online portal.
Arizona: The Arizona Department of Insurance and Financial Institutions (DIFI) accepts consumer complaints online. If you are not sure whether DIFI is the right place for your question, call its Consumer Protection Division at (602) 364-2499.
How PRQ Helps
PRQ's insurance experts help homeowners through roof claims. We can:
- Document roof damage with a free inspection and photo report
- Help you understand your claim, including how depreciation and your deductible affect your payout
- Provide the final invoice you need to request recoverable depreciation once the work is done
- Help you push back with evidence if your claim is denied or underpaid
Your insurance company makes the final coverage decisions, but having a roofer who understands the process can make it much smoother.
Frequently Asked Questions
What is the difference between ACV and RCV?
RCV pays the cost to repair or replace your roof without subtracting depreciation. ACV pays the depreciated value, so older roofs get smaller payouts. Your deductible applies to both.
Is ACV or RCV better for a roof?
RCV usually leaves you with far less out of pocket after a claim, but it typically costs more in premiums. ACV costs less up front but can leave you covering a large share of a new roof, especially as your roof ages.
What is recoverable depreciation?
It is the portion of an RCV claim your insurer may hold back until repairs are completed. Once you send proof the work is done, the insurer pays it.
Do I get recoverable depreciation with an ACV policy?
Usually not. With ACV coverage, depreciation is typically subtracted permanently.
How long do I have to claim recoverable depreciation?
It depends on your policy. Ask your adjuster for the exact deadline, and if you need more time, request an extension in writing.
Why did my insurance check not cover my whole roof?
Common reasons include depreciation being held back on an RCV policy, depreciation subtracted on an ACV policy, a percentage wind/hail deductible or a roof payment schedule based on your roof's age.
Can a roofer help with my insurance claim?
A roofer can document damage, explain the estimate and provide the final invoice you need to request recoverable depreciation. Your insurer still makes the coverage decisions.
Know Your Coverage Before You Need It
Whether your roof is covered at ACV or RCV can mean the difference between paying your deductible and paying thousands more. Pull out your policy, ask your agent the questions above and know your deductible in dollars before the next storm.
Have storm damage or questions about a claim? Schedule a free roof inspection, talk to PRQ's insurance experts or get an instant quote.
Sources and Helpful Resources
- Rebuilding After a Storm: Know the Difference Between Replacement Cost and Actual Cash Value (NAIC)
- Understanding depreciation when you have an insurance claim (The Zebra)
- Roof insurance: ACV versus replacement cost (United Policyholders)
- How to Understand a Wind/Hail Deductible (United Policyholders)
- Hailstorms Are Quickly and Quietly Driving Up Home Insurance Costs (Insurify)
- Utah Insurance Department complaints and consumer help (State of Utah)
- Filing a complaint with Arizona DIFI (State of Arizona)
This article is for general education and is not legal or insurance advice. Coverage, depreciation, deductibles and deadlines vary by insurer and policy. Review your policy and talk to your insurance agent about your specific situation.