Actual Cash Value vs Replacement Cost

“Replacement cost” sounds like “we’ll pay to replace it.” In practice, coverage depends on definitions, depreciation, limits, and whether repairs/replacement actually occur.

Actual Cash Value (ACV)

ACV generally means the item’s value after depreciation (age, wear, condition). Payouts can be lower than expected, especially for older items.

Replacement Cost (RCV)

RCV usually means the cost to replace with a similar item today. Some policies pay ACV first and release the “holdback” after proof of repair/replacement.

Limits and sub-limits still apply

Even under RCV, category limits can cap what is paid for certain property types.