GLOSSARY · INSURANCE
Replacement cost vs actual cash value
Two ways a property policy can value a loss. Replacement cost pays what it costs to repair or replace the item with a new one of similar kind; actual cash value pays that amount minus depreciation, which can leave a large gap on a roof or furniture. A home's dwelling limit should match its rebuild cost, which is not the same as its market value.
Also called: replacement cost value, actual cash value, ACV, rebuild cost, replacement cost, extended replacement cost
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SOURCES
- Consumer guide to homeowners insurance. National Association of Insurance Commissioners.
- Insurance. Consumer Financial Protection Bureau.