ACV vs RCV: How a Claim Check Gets Built

5 min read Brian Berge · Independent insurance agent in Arden Hills, MN
Home Insurance Claims Mechanics

ACV and RCV are not just acronyms. They change the math of a claim check and the timing of what you get paid.

Start here: Home & Property Insurance (MN)

Minnesota hail seasons and freeze-thaw cycles accelerate roof wear, so settlement method and repricing timing matter more than people expect.

ACV vs RCV: How a Claim Check Gets Built

You get the estimate and the number is not what you expected. A chunk is missing. The adjuster says it is depreciation. You hear the words ACV and RCV and wonder why the same roof has two prices.

This is not a trick. It is a settlement method. The method controls both the amount and the timing of the check.

If you want the short definition, start with ACV vs RCV: How Roof Settlement Actually Works. This post walks through the steps in plain language.

What’s really going on

Most roof claims start with an estimate of what it costs to replace the damaged portion. That is the replacement cost. From there, the policy decides how much of that cost is paid right away.

With RCV, the carrier often pays an initial amount based on ACV, then holds back depreciation until the work is completed and invoiced. That holdback is recoverable depreciation.

With ACV, there is no recoverable depreciation. The check is based on the depreciated value and that is the end of it.

The deductible is applied to both. It comes off the top of the loss, not the bottom.

Here is a simple example. If replacement cost is $12,000, depreciation is $4,000, and the deductible is $1,000, the initial ACV payment could look like $7,000. On an RCV policy, the remaining $4,000 is paid after the work is completed and documented. On ACV, it is not paid at all. The details vary, but the flow stays the same.

The timing is the part most people miss. Even on an RCV policy, you may not see the full value until the work is done and the paperwork is turned in.

Supplements can move the numbers too. If additional damage is found after tear-off, the estimate can grow. That does not automatically change depreciation, but it can change the total paid. This is where clear documentation matters.

Depreciation is also not purely about age. Material type, condition, and maintenance can affect it. That is why two roofs of the same age can produce different initial checks. It is a judgment call based on the adjuster estimate.

Matching materials can complicate this. If a partial repair is not possible because the material is discontinued, the scope can expand. That changes the estimate and can change the settlement, depending on the policy form.

Tradeoffs and gotchas

The first gotcha is assuming RCV means full replacement at no friction. It does not. The initial check can look more like ACV, and the rest depends on finishing the job within the required time window.

The second gotcha is underestimating depreciation. Older roofs lose value fast in the estimate. That can make the first check feel light, even on an RCV policy.

The third is the deductible. If you raise the deductible to save premium, you have to cover more of the repair out of pocket before any insurance money shows up.

Another gotcha is contractor timing. In a busy season, you may not get on the schedule quickly. That can put pressure on the RCV recovery deadline, which is why the time window matters as much as the method.

Code upgrades can be another surprise. If a local code requires additional work, that can add cost. Whether and how that gets covered depends on the policy form and endorsements.

And then there is the paperwork. If you miss the deadline for recoverable depreciation, you can lose that portion even on an RCV policy. This is why the RCV period length matters. RCV Period Length: Why 20 Years Costs More Than 10 explains the rule-of-thumb tradeoff.

Price levers or decision factors

These are the levers that change the size of the check:

  • Settlement method. ACV pays the depreciated value. RCV pays replacement cost, but usually in two steps.
  • Roof age and condition. Older roofs have higher depreciation, which shrinks the initial payment.
  • Deductible structure. A higher deductible delays or reduces the net payment. Deductible vs RCV: When ACV Plus Cash Reserve Wins shows how the tradeoff can flip.
  • RCV period length. Shorter windows can make it harder to recover depreciation.
  • Policy endorsements. Some endorsements change how certain materials are valued.

If you are considering ACV as a cost strategy, it is worth reading ACV Roofs as a Deliberate Price Strategy first. It is not a bad idea, but it is a different agreement.

If you are not sure which method you have, check the declarations page and the endorsement list. The wording is usually plain once you know where to look.

Simple decision rule

If you can handle the initial out-of-pocket spend and you plan to repair quickly, RCV is usually the safer route. If you cannot or will not replace the roof after a loss, ACV might be a better fit, but it is a conscious tradeoff.

Next step

If you have a claim in front of you, line up the estimate, deductible, and depreciation line items. Then compare that to ACV vs RCV: How Roof Settlement Actually Works. The clarity is in the math.

Minnesota note: rates and carrier appetite can swing by county, so a Twin Cities renewal isn’t always a perfect proxy for greater Minnesota.

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