21 Feb Actual Cash Value
Actual Cash Value
Despite most homeowners having a replacement cost policy, they are likely to receive an Actual Cash Value payment, or ACV check when the claim is first made ready for payment. The ACV is the total amount of the cost of repairs less any depreciation and deductible.
So, for example, if the cost of repairs to your roof totaled $20,000.00 and you have a $2,000.00 deductible and depreciation of $4,000.00, your ACV payment would be $14,000.00.
$20,000.00 – Total Cost
-$2,000.00 – deductible
-$4,000.00 – depreciation
$14,000.00 – Actual Cash Value
The ACV is the minimum amount that the insurance company must pay. The depreciation, which is covered in another blog, is based on the lifespan of item/product. So, for roofing, the older the roof, the more of its lifespan is used and the more the depreciation will be. The more the depreciation, the less the Actual Cash Value will be.