Actual Cash Value, Explained Simply
By Jordan Mejeur, Esq.
Actual Cash Value or “ACV” is a phrase you will likely see if you have a covered property damage claim – but what does it mean?
Definition & Details
ACV is an industry term.
It is generally described as the cost to replace or restore your property to pre-loss condition, minus any applicable depreciation (a deduction based on age, wear, and tear) of the property, minus the applicable deductible = the amount of your first claim check.
The insurer is not permitted in Florida to issue you an amount lower than the ACV when adjusting a covered loss.
Once you replace or restore your covered property to pre-loss condition, you may be eligible to receive the remaining withheld depreciation, which would then net you the replacement cost value, “RCV,” of your claim less the applicable deductible.
Obviously, if you have replaced or restored your covered property prior to receiving an ACV check, the ACV stage would be moot and the insurer would be obligated to issue you the RCV.
ACV vs. RCV
It is crucial to understand this difference between ACV and RCV when policy shopping because some insurance agents may offer you an ACV policy at a lower rate than the RCV policy.
Should you opt for the cheaper ACV policy and sustain a covered loss to property that has considerably depreciated over time, you may never receive the benefits sufficient to replace or restore your property to pre-loss condition since the insurer wouldn’t be obligated under the ACV policy to tender the withheld depreciation.
Remember the saying, “you get what you pay for,” applies even in policy shopping.
Need Assistance?
This blog discusses general policy language and scenarios, however, each claim, policy, and case are different in their own respect. If you have questions about your insurance policy, do not hesitate to contact your insurance agent to verify that you’re properly insured.
If you need assistance or have questions about an insurance claim, call one of our experienced attorneys for a free consultation at (407) 478-4878.
Jordan Mejeur, Esq.
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