ACV vs. RCV (Actual Cash Value and Replacement Cost Value)

Introducing Nicole Vinson, Esq., an attorney with Merlin Law Group. Merlin Law Group handles property damage insurance claims nationwide. A common issue that arises with many insurance claims has to do with actual cash value vs. replacement cost value.

Actual cash value is abbreviated in the insurance industry as ACV. Many of the insurance policies put forth for property, cover and pay the insureds in actual cash value. Other insurance policies may cover and pay replacement cost value or RCV.

These provisions are critical for the policyholder to fully understand. A common topic that comes up in the insurance industry is personal property loss, contents inventory or goods, things that you have insured that are tangible.

When those things are being valued by the insurance company at actual cash value, it is important to know that their evaluation is subjective, and you, the policyholder, have an opportunity to prevail with your own assessment on the actual cash value of your property in question.

Actual cash value under the International Risk Management Institute has a few varying definitions. The actual cash value of your loss depends on multiple things such as your jurisdiction, what your policy indicates and more.

The most common definition of actual cash value would be replacement cost minus depreciation. Another way that actual cash value is determined is the current fair market value. Finally, insurance companies may use the broad evidence rule, where relevant evaluations of the damaged property is conducted.

Coming back to actual cash value, replacement cost minus depreciation, depreciation can be very subjective. As the policyholder, you may be able to disprove implied depreciation. For example, jewelry and electronics do not depreciate at the same rate.

As a policyholder, it is important that you understand how actual cash value works. If you have questions as to whether or not you are being properly paid on this ACV (actual cash value) form, it is critical that you bring attention to your insurance claim.

[bakoaaron]

Great video Nicole! I worked for State Farm as a property adjuster for 15yrs. I actually trained new employees on how to determine values of stolen or damaged personal items. The CA Department of Insurance issues a "depreciation guide" which all companies use as that, just a guide. An example would be the life of a laptop computer. Per the DOI, a laptop will last 6 years. Of course, depending on how well the customer takes care of the item plays into it's actual value and that's why, again, it's just a guide. One customer may throw the laptop on the floor every night before bed while another cleans his/her laptop with Windex and gently sets it on the floor with a thick towel on top of it each night. 
How did we determine ACV? Ebay! By reviewing sold items with the same specs or model # as the one our customer had you get the true market value. You take the customer's word on the condition but I would always try to pay based on the highest sold laptop, which again had the same model, per eBay. The DOI will not allow an item to be depreciated more than 80% and I would say 99% of the policies have replacement cost coverage. So, an example would be: our customer purchased an Apple MacBook Pro 2yrs before the loss. After researching eBay, and having the customer explain the condition, we agreed the value to be $900 at the time of loss. However the replacement cost of the laptop is $1500. All Homeowner's Policies have replacement cost coverage built in. You have to ask for it to be taken off (which I would never suggest). The customer then has 2yrs from the date of loss to replace the laptop and get paid in full. To make it simple: the first check the customer receives would include $900 for the laptop (the ACV). Then, two weeks later the customer replaces the laptop for $1500 and emails in the receipt. A second check for $600 would then be issued. As you mentioned some items APPRECIATE in value and we would owe that price. If a customer purchased a piece of fine art 25yrs ago for $3000 but that item is selling for $4500 today on eBay we would owe $4500. If we could not find the item on eBay we would consult an art dealer.
ACV/RCV was one of the toughest things to learn and to explain to a customer. I literally did this 40hrs a week for 15yrs unless I was out on catastrophe duty. I no longer work there (you can only bang your head on a cubicle wall for so many years) however I will say State Farm, or at least my managers, were always very fair with the customer. When I first started adjusting claims my manager told to do everything I could to FIND coverage on the claims I was assigned. Being in the industry for 15yrs I would only recommend State Farm, AAA, and The Hartford to friends and family who ask for a name. 
Sorry for the rant but hopefully that helped. If you ever have any questions about the property side of the HO Policy (I did not handle many liability or auto claims) feel free to email me. I'm thinking of starting a blog or even posting an ad on Craigslist to help those that have filed a claim. The ad would not ask for money but if the person felt the information I provided was helpful maybe they could donate a few bucks for my time. The donation would go toward the brain surgery I need due to the cubicle wall damage. Have a great week! Aaron

[YakMotley]

Thanks for the information. Im looking for a Cash Value Policy for a cheap rental I have.

[barbarajonesmba]

Are there websites that show Replacement Cash Value of electronics?

[williamwells]

I have a 3 coat plaster RCV $7400 vs 3200 ACV in a fire claim. The insurance company will not tell me what they paid the builder. The checks went directly to the builder.
What were they paid ACV or RCV? Plus they did not plaster and framed as there is only one plaster left in the world in S. Phila according to the insurance company.

[jjja]

please stop the music in the background, you are a professional and you don't need the romance music in the background, it's more distracting than anything else (if you want us to take you seriously that is)

[rockymntain]

Ok, so if a negligent driver damages my property and destroys my fences and mailbox, how does the insurance company get away with paying cash value? The cost to repair is $2K more than their settlement offer.

[ajviespoli]

Great video so informative however the music is so loud and distracting it takes away from your knowledge