What is depreciation, Actual Cash Value (ACV), and Replacement Cost Value (RCV)?
Actual Cash Value (ACV) is the depreciated value of a damaged item, the depreciation is calculated based on the age and expected lifespan of the item.
Depreciation is the amount of money the insurance company devalues your damaged item based on its age, with RCV coverage you would receive this amount once the item is repaired and a receipt or invoice is sent to insurance.
Replacement Cost Value (RCV) this is the total amount is costs to replace the damaged item. The ACV + Depreciation equals the RCV amount.
Example, if you have a $30,000 roof, and a $1000 deductible. You have a 30 year rated shingle on your home, it is currently 10 years old. Based on age, your roof would be depreciated by 33% ($10,000). This means the ACV value would be $20,000. After subtracting your deductible insurance would send you your first check in the amount of $19,000. Insurance pays for the rest.