ACV vs. RCV — the policy types
Every homeowners policy is one of two types when it comes to roof claims, and which one you have determines the math entirely.
- RCV (Replacement Cost Value): pays the full cost to replace your roof with new materials of like kind and quality. This is the better policy
- ACV (Actual Cash Value): pays the depreciated value of the roof. Older roofs get less, sometimes far less
How depreciation is calculated
Carriers depreciate based on age, condition, and useful life expectancy. The standard formula is straight-line depreciation across expected lifespan:
- 20-year shingle, age 5 = 25% depreciated. ACV pays 75% of replacement cost
- 20-year shingle, age 10 = 50% depreciated. ACV pays 50%
- 20-year shingle, age 15 = 75% depreciated. ACV pays 25%
- 20-year shingle, age 20 = 100% depreciated. ACV pays 0% (just the deductible-free portion of accessories)
Recoverable depreciation (RCV's superpower)
On an RCV policy, the carrier still calculates the depreciated value (ACV portion), but they also withhold the depreciation amount as 'recoverable depreciation' — payable to you AFTER you complete the repair and submit proof. The flow:
- Step 1: Carrier issues first check for ACV portion (depreciated value minus deductible)
- Step 2: You complete the roof replacement and pay your contractor
- Step 3: You submit final invoice + photos to the carrier
- Step 4: Carrier issues second check for the recoverable depreciation
- Result: you recover the full RCV minus your deductible
How to find out which policy you have
Pull your declarations page (the summary at the front of your policy). Look for terms like 'Replacement Cost Coverage,' 'RCV,' or 'Replacement Cost Endorsement' under your dwelling coverage. If you only see 'Actual Cash Value' or 'ACV,' you're on the cheaper coverage. If unclear, call your agent and ask: 'Is my roof covered at RCV or ACV?' Get the answer in writing.
Why ACV policies trap homeowners with old roofs
ACV policies often have premiums 15-30% lower than RCV — appealing in the short term. But on a 15-year-old roof, you'll get half the replacement cost. On a 20-year-old roof, you'll get nothing for the shingles themselves (only labor, dump fees, and accessories). At that point, a 'covered loss' becomes a $15,000 out-of-pocket bill. If your roof is over 8 years old and you're on an ACV policy, the math almost always favors switching to RCV before your next claim.
Code upgrade coverage — separate but related
When local building codes change (e.g., requiring ice and water shield, drip edge, or improved ventilation), the cost to bring your replacement up to current code is often EXCLUDED from base coverage. You need a 'Building Ordinance and Law' endorsement (sometimes called Coverage D or Code Upgrade Coverage). Without it, the carrier pays to replace your old roof with old-code materials only — and you pay the difference for code-required upgrades. Get this endorsement; it's typically $20-50/year.