ACV vs RCV on a roof claim: actual cash value explained

AlvinUpdated October 7, 20267 min read

On a roof claim, RCV (replacement cost value) is what it costs to replace the roof today with similar materials. ACV (actual cash value) is that cost minus depreciation for the roof's age and condition. A replacement cost policy usually pays ACV first, less the deductible, then releases the held-back depreciation once the work is done and documented. An actual cash value policy pays ACV only. Alvin keeps track of which check has arrived on each job and assembles the paperwork for the second one.

Actual cash value vs replacement cost on a roof, side by side

Scroll sideways to see every column.

Some policies mix the two. A homeowner can have replacement cost coverage on the house and a roof endorsement that pays actual cash value once the roof passes a certain age, or a payment schedule that shrinks each year. The only way to know is to read the declarations page and the loss statement for that claim.

This article is general information, not insurance or legal advice. Policies, endorsements and state rules vary. The homeowner's policy and their insurer or insurance agent are the source that governs a specific claim.

How the first check and the depreciation holdback work

1. The adjuster writes the scope. The loss statement lists each line of work with a replacement cost, a depreciation amount and an actual cash value.
2. The insurer issues the first check. It is usually the ACV total minus the deductible. If there is a mortgage, the lender is often named on the check and has its own endorsement process.
3. The roof gets replaced. The homeowner pays the contractor from the first check plus the deductible.
4. Completion is documented. The insurer typically asks for a final invoice, proof the work is complete and photos.
5. The insurer releases the holdback. On a replacement cost policy, the recoverable depreciation is paid, usually up to what was actually spent.

The second half of this process has its own guide: how to get recoverable depreciation on a roof claim.

Worked example with example numbers

Mrs. Henderson's roof has hail damage. The numbers below are examples only.

If her policy is replacement cost: she receives $10,600 first. After the roof is replaced and the insurer has the completion documents, the $5,400 holdback is released. She pays her $2,000 deductible out of pocket. The contractor is paid $18,000 in total: $10,600 plus $5,400 plus $2,000.

If her policy is actual cash value: she receives $10,600 and that is the full claim payment. To replace the roof at $18,000 she covers the remaining $7,400 herself: the $2,000 deductible and the $5,400 of depreciation.

The roof and the damage are identical in both cases. The policy type decides who pays the $5,400.

How to explain ACV and RCV to a homeowner in plain words

Most homeowners see the first check, notice it is far below your price, and assume either you are overcharging or the insurer is shorting them. Explain it before the check arrives. Wording you can adapt:

• At the kitchen table: "Your insurer pays in two parts. The first check covers what your old roof was worth. The second check covers the rest, and they send it after the new roof is on and we send them the final paperwork. Your deductible is your share either way."
• When the first check looks small: "That amount is the actual cash value payment. Look for the line called recoverable depreciation on your statement. That is the part they are holding until the job is finished."
• If the depreciation is non-recoverable: "Your statement shows the depreciation as non-recoverable, which means this policy pays the depreciated value only. I would rather you hear that from me now than after we tear off. Your insurance agent can confirm it."

Do not tell a homeowner what their policy covers. Point to the line on their own statement and send coverage questions to the insurer or their insurance agent. In many states a contractor also cannot waive, absorb or rebate the deductible. Check your state's rule and say so plainly when a homeowner asks.

What to record on every insurance job

A shop running 30 insurance jobs at once (as an example) loses track of holdbacks fast. Put these fields on the job record in your CRM the day the loss statement arrives:

• Insurer, claim number, adjuster name and contact.
• RCV, depreciation, ACV and deductible, copied from the statement.
• Whether the depreciation is marked recoverable or non-recoverable.
• First check: amount, date received, whether a mortgage company must endorse it.
• Any supplement sent and its status. See roofing supplement follow-up.
• The policy's deadline for completing repairs and claiming the holdback, if the homeowner has shared it.
• Holdback: documents sent, date sent, date paid.

What Alvin handles and what stays with you

Alvin does the paperwork and the follow-up. Alvin never negotiates a claim, interprets a policy or argues a price with an adjuster.

To run the numbers from a loss statement, use the free ACV vs RCV calculator.