Definition
ACV coverage reimburses what damaged items are worth today (after depreciation), not what they cost to replace. An older roof depreciates significantly, leaving you underinsured.
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Actual cash value (ACV) coverage deducts depreciation from replacement cost, providing lower payouts. A 10-year-old roof depreciates significantly, resulting in ACV payment far below replacement cost. ACV coverage is cheaper but leaves homeowners underinsured. Most homeowners choose replacement cost coverage instead.
Pro Tip
Replacement cost coverage is worth the premium difference. ACV leaves you shortchanged when claims happen.
Example
ACV coverage pays $15,000 for 10-year-old roof where replacement cost is $30,000 due to 50% depreciation.