The Difference Between Replacement Cost and Actual Cash Value
When it comes to home insurance claims, the difference between replacement cost and actual cash value can have a major impact on how much money you receive after a loss. Understanding this key distinction helps you make smarter coverage choices—and can save you thousands when it matters most.
Here’s how it breaks down:
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Replacement Cost (RCV) – This coverage pays to repair or replace damaged property using brand-new materials at today’s prices. That means if your roof is destroyed in a storm, your policy covers the full cost to rebuild it—without subtracting for age or wear.
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Actual Cash Value (ACV) – This option reimburses you for the depreciated value of your property. For example, if your 10-year-old TV is damaged, you’ll only receive what it’s worth today—not what it would cost to buy a new one.
The difference between replacement cost and actual cash value can easily add up to thousands of dollars. While replacement cost coverage generally comes with a slightly higher premium, it offers much stronger financial protection. Actual cash value coverage, on the other hand, may leave you covering the gap between your payout and the true cost to rebuild or replace your belongings.
If you’re not sure which type of coverage your current policy includes, take a few minutes to review it with your insurance agent. That quick check can mean the difference between fully rebuilding your home—or struggling to make up the shortfall.
Serving homeowners across Maryland, Virginia, Delaware, Pennsylvania, and Washington, D.C., William Gunn Insurance helps clients understand their options and find the right balance of protection and price for complete peace of mind.