ACV vs RCV: What Your Roof Insurance Policy Actually Pays
The policy type on your declarations page determines whether your insurer pays for what your roof was worth before the storm, or what it costs to replace it today. The gap can be enormous.
The short version
ACV (Actual Cash Value) pays you the depreciated value of your roof - what a used, aged roof was worth the moment before the damage happened. Depreciation is permanent on an ACV policy. You never recover it.
RCV (Replacement Cost Value) pays ACV first, then releases the withheld depreciation once you complete repairs and submit an invoice. The total is the full replacement cost minus your deductible - but only if you actually do the work. If you take the money and don't repair, you keep only the ACV payment.
How depreciation works
Straight-line depreciation is a common method carriers use for roofing: the roof loses value evenly over an expected useful life defined in your policy. How carriers calculate depreciation - the method, the useful life figure, and any cap - varies by insurer and policy. Your policy's loss settlement section or a roof endorsement is where to find the specific method that applies to you.
Illustrative example (made-up numbers to show the mechanics): a policy that assigns a 25-year useful life to an architectural shingle roof and uses straight-line depreciation would treat a 10-year-old roof as 40% depreciated (10 ÷ 25). On a $20,000 replacement cost, that is $8,000 of depreciation - gone forever on an ACV policy.
Many policies cap depreciation so a roof that has outlived its defined useful life retains some ACV floor. Caps vary - some policies cap at 80%, others at different levels, and some have no cap at all. Check your own policy. Whatever the cap, an old roof on an ACV policy can return far less than the repair estimate, and if your deductible is large enough, the payout can reach zero.
The two-cheque structure on RCV
When you file under an RCV policy, you do not receive the full replacement cost upfront. The structure is:
- First cheque: ACV minus your deductible. This is released immediately after the claim is approved.
- Second cheque (withheld depreciation): Released after you complete repairs and submit a contractor invoice. Some carriers require the invoice; others require a Certificate of Completion. Read your policy.
If you do not complete repairs, you keep only the first cheque. The withheld depreciation is never paid. This is by design - RCV is tied to actual replacement, not a cash-out.
Worked example
| ACV policy | RCV policy | |
|---|---|---|
| Replacement cost | $20,000 | $20,000 |
| Depreciation (40%) | −$8,000 | −$8,000 |
| Actual Cash Value | $12,000 | $12,000 |
| Deductible | −$2,000 | −$2,000 |
| First cheque | $10,000 | $10,000 |
| Withheld depreciation (released after repairs) | - | $8,000 |
| Total payout | $10,000 | $18,000 |
| Your out-of-pocket | $10,000 | $2,000 |
On a newer roof the gap is smaller. The example above shows the same roof at age 20: if the policy uses a 25-year useful life and an 80% depreciation cap, the roof is fully depreciated and ACV equals $4,000. Against a $2,000 deductible, the ACV payout is $2,000 - on a roof that costs $20,000 to replace. On an RCV policy, the total payout after repairs is still $18,000. Your policy's actual cap and useful life figure determine the real numbers.
How to tell which policy you have
Look at your declarations page (the summary sheet your insurer sends at renewal). You are looking for one of these labels in the dwelling or roof coverage section:
- RCV, RC, or Replacement Cost - you have RCV coverage.
- ACV, Actual Cash Value, or Market Value - you have ACV coverage.
- Functional Replacement Cost - a hybrid: pays to replace with a similar but not identical material. Common when a carrier will replace a tile roof with asphalt. Read the definition in your policy carefully.
If you cannot find the label, call your agent and ask specifically: "Does my policy pay replacement cost or actual cash value for roof claims?" Get the answer in writing.
For a step-by-step walkthrough of the declarations page - including where to find the dwelling limit, how to read percentage deductibles, and what roof endorsements to look for - see the full dec page guide.
When ACV still makes sense
ACV premiums are lower - sometimes significantly. On a newer roof, the depreciation gap is small and the premium savings may justify the trade-off. As the roof ages, accumulated depreciation grows, and the gap between what ACV pays and what replacement actually costs widens. At some point the annual premium difference is smaller than the depreciation gap that an ACV policy would leave you holding. Where that crossover falls depends on your roof, your policy, and your carrier - there is no universal threshold.
Some carriers will not offer RCV coverage on roofs past a certain age. The cutoff varies by carrier and material. In that case you may not have the option regardless of preference.