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Definition
Replacement Cost Value (RCV) is a claim-settlement method that pays the full cost to replace damaged or destroyed property with new equivalent items, without deducting depreciation. That means if your roof or furniture is destroyed, you're reimbursed based on what it costs to buy new today, not the lower used value. Because it doesn't factor in wear and age, RCV coverage costs more than ACV (Actual Cash Value) coverage, but it leaves you with a smaller out-of-pocket gap after a loss. RCV is common on homeowners dwelling coverage, and many policies apply it to the structure itself. Keep in mind that insurers often pay RCV claims in two parts: the depreciated amount first, then the remaining balance once you actually repair or replace the item. Always read your policy to confirm which items qualify.
Also Known As
RCV
Replacement Cost Coverage
Replacement Cost
Full Replacement Value
Used in Context
- After a storm wrecked her roof, Maria's RCV homeowners policy paid to install a brand-new roof instead of just the depreciated value.
- When comparing quotes through Dreamy Leads, you can ask whether the dwelling coverage settles claims on an RCV or ACV basis.
- A landlord upgraded to RCV coverage so a destroyed kitchen would be replaced new rather than reimbursed at its aged value.
What's the difference between RCV and ACV?
RCV pays the full cost to replace property with new equivalent and does not subtract depreciation. ACV deducts depreciation for age and wear, so it pays less. RCV coverage costs more, but it reduces your out-of-pocket gap when you replace items after a covered loss.
Does RCV cover everything in my homeowners policy?
Not always. RCV is common on homeowners dwelling coverage, meaning the structure itself. Other items, like personal belongings, may settle differently depending on your policy. Read your specific policy or ask your agent to confirm which items are covered at replacement cost versus another method.
Why does RCV cost more than ACV coverage?
Because RCV pays to replace property with new equivalent and does not deduct depreciation, the insurer takes on a larger potential payout. That higher risk is reflected in your premium. ACV costs less since it factors in depreciation and pays the lower depreciated value of the damaged property.
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