Replacement Cost Value vs Actual Cash Value: A Guide for Central Florida Homeowners

Understanding the difference between Replacement Cost Value (RCV) and Actual Cash Value (ACV) is critical for Central Florida homeowners insurance. These two terms directly affect how much money you receive after a claim—especially following hurricane, wind, or storm damage.

Unfortunately, many homeowners don’t realize how their policy pays until after a loss occurs. Knowing the difference now can help you avoid costly surprises later.

What Is Replacement Cost Value (RCV)?

Replacement Cost Value (RCV) coverage pays the cost to repair or replace damaged property using materials of like kind and quality, without deducting for depreciation.

In short, RCV coverage is designed to restore your home to its pre-loss condition.

RCV Example

If a storm damages your roof and it costs $25,000 to replace today:

• With RCV coverage, the insurance payout is based on the full replacement cost (minus your deductible).

RCV coverage is often recommended for Florida homeowners because:

• Construction and labor costs are high
• Storm damage is frequent
• Depreciation can drastically reduce payouts under ACV policies

What Is Actual Cash Value (ACV)?

Actual Cash Value (ACV) coverage pays the replacement cost minus depreciation, which reflects the age and condition of the damaged item.

ACV Example

That same roof replacement costs $25,000, but the roof is 15 years old:

• Depreciation may reduce the value by 40–50%
• Your payout could be closer to $12,000–$15,000, minus the deductible

This often leaves homeowners paying significant out-of-pocket expenses to complete repairs.

Why RCV vs ACV Matters for Central Florida Homes

Homes in Central Florida face increased exposure to:

• Hurricanes and tropical storms
• High winds and hail
• Heavy rain and water intrusion
• Intense heat that accelerates roof aging

Many insurance carriers now apply ACV coverage to roofs, even when the rest of the home is insured on an RCV basis. This is especially common for:

• Older roofs
• Certain shingle types
• Policies with roof or loss settlement endorsements

Understanding how your policy values losses before hurricane season is essential.

Common RCV and ACV Misconceptions

“My policy says replacement cost, so everything is covered that way.”
Not necessarily. Roofs and certain components may still be ACV.

“ACV only applies to very old homes.”
False. Many newer homes have ACV roof endorsements.

“Market value determines my claim payout.”
Insurance claims are based on policy language, not market or tax value.

How to Tell If Your Policy Is RCV or ACV

To determine whether your homeowners insurance policy uses RCV or ACV, review:

• Your declarations page
• Any roof or loss settlement endorsements
• The Loss Settlement section of your policy

If the wording is unclear, that’s common—insurance policies are highly technical by design.

Choosing the Right Home Insurance Coverage in Central Florida

While RCV coverage may cost more upfront, it often provides far greater financial protection, especially in storm-prone areas of Florida. The right choice depends on factors such as:

• Roof age and condition
• Type of construction
• Budget and risk tolerance

Making an informed decision now can prevent major financial stress after a loss.

A Simple Next Step

If you’re unsure how your Central Florida homeowners insurance policy would respond after a storm or hurricane, a policy review can help clarify your coverage.

At Adkinson Insurance, helping homeowners understand their options—before a claim happens—is part of the process.