RCV versus ACV: why the first insurance check is smaller than the estimate

The estimate is not the check

The adjuster's estimate says your roof costs, say, $18,000 to replace. The first check is for $9,500. Nothing is wrong. The difference is the deductible plus depreciation. On a replacement cost policy, the depreciation is paid after the work is done. This page defines the words. Your own numbers come from your insurer.

The three numbers

RCV, replacement cost value, is what it costs to replace the roof today. ACV, actual cash value, is RCV minus depreciation for the roof's age and condition. Recoverable depreciation is the gap between them, paid after the insurer sees proof the work was completed at the agreed scope.

Worked example

Made-up numbers, to show the math. RCV $18,000. Deductible $2,000. Depreciation $6,500. First check: $18,000 minus $2,000 minus $6,500 = $9,500. After the roof is done and the final invoice is submitted, the second check releases the $6,500. In this example the homeowner pays the $2,000 deductible to the contractor, and that is the only money that comes from them.

Where homeowners lose track

Three ways. They never submit the final invoice, so the depreciation is never released. They hire a contractor who "waives the deductible," which is against the law in many states and usually means the scope was cut to cover it. Or the roof is insured at ACV only, which they did not know until the claim. Your agent can tell you which kind of policy you have. The RCV and ACV Worksheet in Guide 3 has the blanks to fill in with the numbers your insurer gives you, and Guide 4 covers how the payments should be scheduled with the contractor.

We teach how a claim moves. We do not interpret your policy or adjust your claim.