A Comprehensive Guide to Actual Cash Value vs. Replacement Cost Value For Roofing

Roof replacement can be a substantial investment, especially when unforeseen damage occurs and or your roof is severely damaged. Whether it’s water stains on your ceiling or shingles strewn across your yard after a storm, the need for roof replacement in Twin Cities becomes apparent. As a homeowner, it’s crucial to protect your home from further damage by promptly addressing roofing issues and understanding what may go into repairs for it. An important thing to think about is actual cash value (ACV) and replacement cost value (RCV) insurance policies. These will becomes paramount in the roofing replacement process.

In the roofing industry, understanding the difference between actual cash value and replacement cost value insurance policies is crucial for homeowners and contractors alike. ACV and RCV policies determine how much coverage and financial assistance homeowners will receive in the event of roof damage. ACV policies offer reimbursement based on the current depreciated value of the roof, while RCV policies cover the full cost of replacing the roof. Each policy type has its pros and cons, impacting the amount homeowners may need to pay out of pocket for roof repairs or replacements. By delving into the details of ACV and RCV policies, homeowners and roofing professionals can make informed decisions to ensure proper insurance coverage and protect against unexpected roofing expenses.

Navigating the Insurance Claim Process

So, you have roof damage after a strong storm. Not only is this stressful because of damaged property, but you’ll also have to file an insurance claim to get it taken care of. But before reaching out to the insurance company, you need to know which policy you have. When looking at your paperwork, you’ll either have an ACV policy or an RCV policy as part of your homeowners insurance policy.

It can be hard to understand what each policy offers if you’ve never been through the insurance process. So, what’s the difference between the two? Is one better than the other? Bold North Roofing and Contracting has helped homeowners like you understand their insurance policy and what it means for their roof.

What is an ACV Coverage Policy?

With an ACV policy, you’ll receive a payout for the depreciated value of your roof. The insurance company will only pay you the current value of your roof as it stands today. Once your claim is approved, you’ll receive a check for the actual cash value and will need to cover the cost difference for your new roof out of pocket. It’s important to note that the amount your roof has depreciated and the check you’ll receive will be determined by your insurance company.

What is an RCV Coverage Policy?

As for an RCV policy, your insurance company covers the entire cost of the roof replacement. However, it works differently than an ACV policy, and you don’t receive a check for the full amount upfront. When your claim is approved, the insurance company provides you with an estimate for the scope of work required to replace your roof with a brand-new version of itself. Initially, you’ll receive a check for the actual cash value of your roof, while the insurance company holds back the recoverable depreciation.

After getting your roof replaced and providing proof that the work was done according to the claim, the insurance company will then send another check to cover the remaining cost of your new roof. It’s important to follow the scope of work and complete the necessary repairs to receive the second check for the depreciated part of the claim.

Roofing Contractor

Deciding Between an ACV Policy and an RCV Policy

After learning about what each policy offers, you should have a good idea of which one is better for your roof. In general, a RCV policy offers more financial protection when filing a claim. While an ACV policy is not inherently bad, it may result in you paying more out of your pocket if the actual cash value check doesn’t cover the necessary scope of work. It’s essential to consider the potential costs involved and choose the policy that aligns with your budget and provides adequate coverage.

To help illustrate the difference between the policies, let’s explore a scenario:

Imagine your roof is 10 years old, and you initially paid $12,000 for its installation and total cost.

Actual Cash Value Policy Scenario

With an ACV policy, the insurance company calculates the depreciation of your $12,000 roof over the last 10 years and sends you a check for $6,000, representing the actual cash value at market value. You can use this $6,000 check towards your roof replacement. However, after receiving an estimate from a roofing contractor, you find out that the cost of a new roof is $15,000. The $6,000 check won’t cover the entire replacement cost, leaving you responsible for the remaining $9,000.

While it may be tempting to find a lower-priced roof or cut corners, it’s crucial to consider the long-term consequences. If you opt for a cheaper roof, it may result in lower quality and labor, thus increasing the risk of premature roof failure.

Replacement Cost Value Policy Scenario

For an RCV policy, you’ll also receive the first $6,000 actual cash value check, similar to an ACV policy. However, unlike the ACV policy, the insurance company will cover the additional $9,000 payout amount after the work is completed. This means your roof replacement should come at no cost to you, except for your deductible. It’s important to provide proof that the scope of work was completed according to the claim to receive the remaining funds from the insurance company.

It’s worth noting that with an RCV policy, the insurance company only pays to restore your old roof to its original condition. If you want to upgrade to a different roofing material or improve the quality, you will need to cover the difference out of pocket.

Ultimately, the decision between an ACV policy and an RCV policy depends on your specific situation and preferences. It’s recommended to review your insurance policy, consider your financial capabilities, and consult with a roofing professional or insurance expert to make an informed decision.

Roof Work

Advantages of an RCV Policy

RCV insurance policies are widely regarded as superior to ACV policies for several reasons. To start with, RCV policies provide coverage for the full replacement cost of a damaged roof, ensuring that you can restore your roof to its pre-damaged condition without bearing a significant financial burden. Unlike ACV policies, which factor in depreciation and only cover the current value of your roof, RCV policies account for the actual cost of replacing the roof with new materials and labor. Additionally, RCV policies offer greater peace of mind and protection, as they cover the entire replacement process, including any unforeseen expenses that may arise during the project. With RCV policies, homeowners can have confidence in the comprehensive coverage and the ability to restore their roofs to optimal condition without incurring substantial out-of-pocket costs.

Full Coverage for Roof Replacement

With an RCV policy, the insurance company covers the entire cost of replacing your damaged roof (up to the policy limit), minus the deductible. This means you won’t have to bear the burden of paying for a significant portion of the replacement cost out of pocket. In contrast, an ACV policy only provides a payout based on the depreciated value of your roof, which may not be sufficient to cover the full replacement cost.

Financial Protection

RCV policies offer greater financial protection in the event of roof damage. By receiving a payout that covers the cost of a brand-new roof, you can restore your home’s roof to its pre-damaged condition without significant financial strain. This can provide peace of mind and help you avoid incurring substantial expenses that may disrupt your budget or savings.

Account for Inflation and Material Cost Increases

RCV policies consider the current market prices of roofing materials and labor. Over time, the cost of materials and services tends to rise due to inflation and other factors. RCV policies ensure that you receive adequate compensation to meet the current costs of a roof replacement, mitigating the impact of inflation and preventing you from having to pay the difference out of pocket.

Flexibility for Upgrades and Changes

RCV policies provide more flexibility if you wish to upgrade your roofing material, change the design, or make other modifications during the replacement process. Since the policy covers the full replacement cost, you can use the payout to cover the expenses associated with upgrades or changes, subject to the policy limits.

Simplified Insurance Claims Process

RCV policies generally have a more straightforward claims process compared to ACV policies. Instead of negotiating and calculating the depreciated value, the insurance company estimates the replacement cost upfront, providing you with a clearer understanding of the coverage you’ll receive. This simplifies the claims process and reduces the potential for disputes over the value of the roof.

Ultimately, RCV policies offer greater protection and financial security when it comes to roof replacement. They ensure that you can restore your damaged roof to its original condition without bearing a significant financial burden. However, it’s important to consider factors such as policy premiums, deductibles, and your specific circumstances when determining which policy is best suited for your needs. Consulting with your insurance provider and a roofing professional can help you make an informed decision based on your unique situation.

Bold North Roofing Contractor

Why Supplementing Your Insurance Claim is Important

Now that you understand the difference between insurance policies and why an RCV policy may be more favorable for your roof in the event of storm damage, it’s crucial to address the process of supplementing your insurance claim. Insurance adjusters may not always include all the necessary line items for your roof in their estimates, which can result in insufficient coverage. To properly ensure your claim accurately reflects the work required and the materials needed, it’s important to supplement your claim.

By supplementing your insurance claim, you can take the necessary steps to ensure that every component and material your roof needs is included in the estimate. This includes accounting for code upgrades to ensure your roof meets the necessary building codes. However, it’s important to note that having a code upgrade policy is necessary for insurance to cover these code line items. To ensure your claim is supplemented correctly, it’s crucial to show your insurance paperwork to your roofing contractor, who can help navigate the process and provide the necessary documentation.

Bold North offers homeowners a valuable service by directly supplementing insurance carriers. The best part is that this service is provided completely free of charge, resulting in substantial time and cost savings for homeowners. By handling this, Bold North eliminates the need for homeowners to navigate the complex insurance claims process themselves. With our expertise in dealing with insurance carriers, homeowners can have peace of mind knowing that their roofing needs are efficiently managed and that they can fully utilize their insurance benefits without any additional financial burden.


Navigating the complexities of insurance policies can be a daunting task, especially when it comes to understanding the differences between ACV and RCV policies.

While RCV policies are generally favored for their comprehensive coverage and ability to cover the full replacement cost, there are situations where an ACV policy may be considered better, such as for older roofs or in cases where the cost difference is manageable. Ultimately, the decision between ACV and RCV policies depends on various factors, including your budget, the age and condition of your roof, and your willingness to assume out-of-pocket costs.

By considering these factors and consulting with professionals, you can make an informed choice that best suits your specific needs. Whether you opt for actual cash value or replacement cost value, the key is to ensure that you have adequate insurance coverage to protect your home and investments from the potential risks associated with roof damage.

Before you talk to any insurance agent, if you would like more information regarding ACV and RCV information, feel free to contact us today at Bold North Roofing! Our experienced team can help answer normal wear or ACV and RCV questions for you regarding your personal property coverage.

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