ACV vs RCV Cheat Sheet for Commercial Policies

ACV in Plain Language

Actual Cash Value (ACV) = Replacement Cost - Depreciation.

If a new roof costs $100,000 and your existing roof is 50% through its useful life, ACV pays roughly $50,000. You're responsible for the depreciation difference out of pocket - unless the policy releases "recoverable depreciation" later.

RCV in Plain Language

Replacement Cost Value (RCV) = Full Replacement Cost.

Most commercial RCV policies pay in two steps:

Initial payment - at ACV
Depreciation recovery - after work is documented complete

So the owner cash-flows the gap until closeout documentation is delivered to the carrier.

How to Read Your Declaration Page

Look for:

"Valuation method" or "Loss settlement" - states ACV or RCV
Depreciation schedule - often an endorsement
Named-storm deductible - separate from standard deductible
Coinsurance clause - may reduce payouts if under-insured

Common Gotchas

ACV-only policies - typically cheaper but shift depreciation cost to you
Depreciation of labor - some carriers depreciate labor in addition to materials
"Recoverable" vs "non-recoverable" depreciation - the difference is whether you can recover it later
Cosmetic-only endorsements - limit payouts for aesthetic damage like metal dents

When to Escalate

If the carrier's depreciation seems aggressive or the scope is light, a documented supplement is your path. Your contractor provides the evidence; the carrier reviews. We don't guarantee outcomes but we do prepare thorough supplement packages.

Questions to Ask Your Broker

Is my roof covered at ACV or RCV?
What's the depreciation schedule?
What's my wind/hail deductible vs my standard deductible?
Is there a cosmetic-only limitation?
How long do I have to complete work after claim approval?

Frequently Asked Questions

How is depreciation calculated on ACV payouts?

Most carriers use straight-line depreciation based on roof age and expected useful life. A 15-year-old roof with an expected 20-year life would be depreciated roughly 75%. Carriers publish their own depreciation schedules.

What is recoverable depreciation and when is it released?

Recoverable depreciation is the amount initially withheld from an ACV settlement that the carrier releases once you complete the repair or replacement and submit documentation. Most RCV policies hold back depreciation as a financial incentive to complete repairs. Once your contractor submits a completion invoice matching the approved scope, the carrier typically releases the holdback within 30 to 90 days.

Does my commercial property have ACV or RCV coverage?

Check your declaration page - it will say either 'Actual Cash Value' or 'Replacement Cost Value' under the covered property section. Most modern commercial policies default to RCV, but endorsements can downgrade it. Wind/hail percentage deductibles and named-storm exclusions are separate from the ACV/RCV designation. If you can't locate the declaration page, your broker can send it within a business day.

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