What Is Replacement Cost Value?

Learn how Replacement Cost Value helps you rebuild or replace covered property without factoring in depreciation.

Understanding Replacement Cost Value

Replacement Cost Value (RCV) is a method insurance companies use to determine how much they may pay to repair or replace damaged property after a covered loss.

Unlike Actual Cash Value, Replacement Cost Value does not reduce your claim payment because of normal depreciation.

Simple Example: Imagine a storm damages your 10-year-old roof. The cost to replace the roof today is $10,000. Under an ACV policy, depreciation might reduce the claim payment to $7,000 before your deductible. Under an RCV policy, the insurance company may pay the full $10,000 replacement cost, minus your deductible and subject to policy terms.

Although RCV coverage may have a higher premium than ACV coverage, many homeowners find the additional protection worthwhile.