CLAIMS GLOSSARY · FLORIDA & NEW JERSEY

Actual Cash Value vs. Replacement Cost (ACV vs. RCV)

Also called: ACV, RCV, actual cash value, replacement cost value, loss settlement

By Nelson Avila, Licensed Florida Public Adjuster (License G332385) · Florida Certified Contractor
Homeland Public Adjusters · Last reviewed: October 2026

Definition

Replacement cost value (RCV) is what it costs to repair or replace damaged property with new materials of like kind and quality today. Actual cash value (ACV) is RCV minus depreciation for age, wear and condition. A replacement-cost policy pays ACV first and the rest after repairs; an ACV policy pays only the depreciated amount and stops there.

What the two terms mean

Every property policy has a loss settlement clause that says which measure applies to which coverage. On a standard homeowners form (HO-3), the dwelling and other structures are settled at replacement cost as long as the building is insured to at least 80% of its replacement cost; personal property is settled at ACV unless a replacement-cost contents endorsement was bought. Landlord (DP-1) and some older or budget forms settle everything at ACV. Commercial property forms let the owner choose at purchase.

How ACV is calculated

There is no single formula in the policy. In practice the adjuster’s estimating software assigns each material a useful life and depreciates it by age: a 15-year-old water heater with a 12-year life may be depreciated 100%; 8-year-old laminate flooring with a 20-year life about 40%. Some policies define ACV as “replacement cost less depreciation”; others leave it undefined, and courts in some states read it as fair market value or the “broad evidence rule.” What the carrier may not do is depreciate labor, tear-out, debris removal or code upgrades as if they wore out.

Florida

Florida sets the payment order for replacement-cost policies in §627.7011(3): the insurer must first pay at least ACV less the deductible, then the remaining amounts as repairs are performed, and must pay RCV with no holdback on a total loss. The gap between the two numbers is recoverable depreciation. Florida also allows a roof-specific ACV loss settlement by endorsement (see roof payment schedule), which is the most common way a replacement-cost policy becomes an ACV policy for the most expensive component of the house.

New Jersey

New Jersey policies follow the ISO loss settlement language: ACV first, replacement cost on completion, with a time limit to claim the difference. The state’s claims regulation, N.J.A.C. 11:2-17.7, governs how fast the insurer must act, not the measure of loss. Pay attention to the 80% insurance-to-value condition: if the home is underinsured, the carrier may pay a proportion of RCV or ACV, whichever is greater, rather than full replacement cost.

Where claims go wrong

Contents paid at ACV when a replacement-cost contents endorsement is on the declarations page.
Depreciation applied to labor-only line items.
A total loss paid with a holdback, which Florida law prohibits.
ACV computed from a market-value number rather than from the repair estimate, producing a payment far below what repairs cost.
The holdback never requested because the policy’s deadline passed.

Frequently asked questions

Is replacement cost always better than actual cash value?

On a claim, yes: replacement cost pays what it takes to restore the property, while ACV leaves you to fund the depreciation yourself. Replacement-cost coverage costs more in premium, and some carriers only offer ACV on older roofs or older homes.

Does ACV include the deductible?

No. The first payment is ACV minus the deductible. The deductible is subtracted once, from the first check, not again when the holdback is released.

How do I know which one my policy pays?

Look for the Loss Settlement condition in the policy and for any endorsement titled Actual Cash Value Loss Settlement, Roof Surfacing, or Functional Replacement Cost on the declarations page. Our free Policy Scan reads the declarations page and tells you in plain English.

Can the adjuster depreciate a brand-new item?

Only on a true ACV policy and only to the extent it has aged. An item installed last year has little depreciation; an estimate that shows 30% on it is wrong on its face.

Related terms

Recoverable Depreciation

Recoverable depreciation is the money your insurer withholds from a replacement-cost claim payment until you repair or replace the damaged property.

Read the definition ›

Roof Payment Schedule

A roof payment schedule (roof surfacing payment schedule) is a policy endorsement that pays a roof loss at a percentage of replacement cost set by the roof's age and material, instead of full…

Read the definition ›

Proof of Loss

A proof of loss is a sworn, signed statement from the policyholder setting out the date and cause of the loss, the property involved, the interest of the insured and others, other insurance, and the…

Read the definition ›

Coinsurance (Property Insurance)

Coinsurance, on a property policy, is a condition that requires the building to be insured for at least a stated percentage of its value (commonly 80%, sometimes 90% or 100%).

Read the definition ›

If this is your loss, call Homeland before you talk to the insurance company: Florida (305) 783-3777, New Jersey (732) 517-3777, 24 hours. A licensed public adjuster reviews the claim for free and calls you back right away. No Recovery, No Fee.

Sources

This article is for general information only and is not legal or insurance advice. Statutes, regulations and policy wording change, and how they apply depends on your own policy and the facts of your claim. Homeland Public Adjusters is a public adjusting firm, not a law firm.

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