After you’ve made a claim, the insurance company’s adjuster will inspect your home for damage and prepare an estimate. When you receive the insurance company’s estimate, you see that it lists two amounts for “RCV” and “ACV.” How much money do you have to make repairs?
ACV is an abbreviation for “actual cash value.” ACV is the actual value of the property in its existing condition, after factoring in “depreciation” based on its age and condition. Insurance adjusters typically rely on specialized computer software to calculate the ACV. Under most property insurance policies, the insurance company is obligated to pay the ACV within a specific period of time – usually 60 days or less. The policyholder is entitled to payment of the ACV regardless of whether the repairs are made.
RCV is an abbreviation for “replacement cost value”. This number represents the total estimated cost to repair or replace the damaged property. Under a replacement cost policy, the RCV is the total amount that the insurance company must pay after the repairs have been made (minus the ACV payment it made at the beginning of the claim). Keep in mind that other issues may arise as repairs are being made, which may increase the costs to repair the damage.
Of course, before you agree to any estimate offered by your insurer, make sure that you have a contractor lined up who will actually perform the work necessary to repair or replace the damaged property for the amount your insurance company estimated. If the insurance company undervalues your claim, there are several options such as further negotiation, appraisal, or even court.
Contact us today if your insurance company undervalued your claim and we can discuss which option is best in your situation.