Ch 2 · Reading Your Policy Like an Adjuster
Module 2.5
ACV vs RCV — and Recoverable Depreciation
Same loss, different policy, two paychecks. The 2-step payout. The roof endorsement trap. How to actually recover depreciation.
10 min read
What you'll learn
The single line in your policy that decides whether your roof claim pays in full or pays a fraction. The math. The mechanics. How to recover depreciation the carrier withheld.
2.5.1 The 2 settlement methods
| Method | What it pays | Effect |
|---|---|---|
| Replacement Cost Value (RCV) | Cost to replace damaged property w/ new of like kind and quality, no depreciation deducted | Gold standard. New roof = new roof. |
| Actual Cash Value (ACV) | Replacement cost minus depreciation for age, wear, condition | What carrier pays first; depreciation withheld |
Same loss. Same policy limit. Different paychecks.
2.5.2 The depreciation math
Carrier calculates depreciation as: Replacement Cost × (Age / Useful Life)
Example — 15-year-old roof, 25-year useful life:
| Item | $ |
|---|---|
| Replacement cost | $20,000 |
| Depreciation: $20,000 × (15 / 25) = | $12,000 |
| ACV payment | $8,000 |
| RCV payment (full) | $20,000 |
Difference: $12,000. That's depreciation. On a Replacement Cost policy, that $12,000 is recoverable. On an ACV-only policy, it's gone.
2.5.3 The 2-step Replacement Cost payout
This is where most homeowners leave money on the table.
A standard FL Replacement Cost policy pays in 2 steps:
| Step | When | Amount |
|---|---|---|
| 1. ACV check | After claim approval | Replacement cost minus depreciation |
| 2. Recoverable depreciation check | After repairs are completed and documented | The withheld depreciation |
If you never complete repairs to the carrier's documentation standard, you forfeit the depreciation. The carrier keeps it.
Documentation typically required to release recoverable depreciation:
- Invoices showing actual repair costs paid
- Photos of completed work
- Lien waivers from contractors
- Sometimes: signed contractor certification of completion
The trap: homeowners take the ACV check, do partial repairs (or DIY), never submit documentation, and lose the depreciation. Carriers don't remind you to claim it. Your responsibility.
Time limit on recovering depreciation
FL policies typically allow 180 days from the date of loss to complete repairs and submit documentation, sometimes extended for cause. Read your policy. Don't miss this deadline.
2.5.4 The roof endorsement trap
Big reform area in FL. Many carriers have moved older roofs to ACV-only settlement.
How it works
Standard policy: roof pays at RCV regardless of age.
Modified policy w/ roof endorsement: roof over a certain age (often 10 or 15 years) pays at ACV only. No recoverable depreciation. What you get is what you get.
Why this matters
15-year-old roof, $20K replacement cost:
- RCV policy: $20K paid (eventually, after 2-step process)
- ACV-only roof policy: ~$8K paid. Period. Done.
$12,000 difference on a single roof claim.
How to find out which version you have
- Pull your policy.
- Find the Loss Settlement provision (usually section "I — Property" or "Conditions").
- Look for roof-specific language — often a separate paragraph or endorsement.
- Look for terms like "ACV settlement applies to roofs over [N] years of age" or "Schedule of Coverage for Roof."
If you have an older roof and an ACV-only roof endorsement: plan accordingly. Either replace the roof on your dime (and re-rate at next renewal) or budget for the depreciation hit on any future claim.
2.5.5 ACV vs RCV on Coverage C (contents)
Same logic applies to personal property.
Default in many FL policies: Coverage C pays ACV unless you've added Replacement Cost on Contents endorsement.
A 5-year-old TV that cost $1,000:
| Settlement | Payment |
|---|---|
| ACV | ~$300 |
| RCV (w/ endorsement) | $1,000 |
Replacement Cost on Contents endorsement usually costs $25–$100/year. Add it.
2.5.6 Improper depreciation — what to fight
Carriers sometimes apply depreciation incorrectly. Common errors:
1. Depreciating items that shouldn't be depreciated
- Labor — most courts and policies say labor isn't depreciable (you can't have "old" labor)
- Mitigation costs — emergency tarping, water extraction, etc. should be paid in full
- Removal/disposal — cost to remove damaged materials is current cost
- Code upgrades — paid under Ordinance and Law, not depreciated
2. Excessive useful life
Carrier claims a 25-year asphalt shingle roof has 50-year useful life → halves your loss.
Fight it w/: manufacturer documentation, industry standards (e.g., NAHB), independent contractor opinion.
3. Compounding depreciation
Carrier depreciates twice — once for age, again for "condition." Watch for this in carrier estimates.
4. Applying ACV when policy says RCV
Read your loss settlement provision. If it says RCV, fight any ACV-only payment.
2.5.7 The recoverable depreciation playbook
To actually receive the depreciation portion:
- Don't accept the ACV check as final. It's step 1 of 2.
- Complete repairs to the carrier's specifications.
- Document everything — invoices, photos, lien waivers, contractor certifications.
- Submit to the carrier within the policy time limit (usually 180 days; verify yours).
- Follow up — carriers don't always release depreciation automatically.
- If denied, appeal in writing with your full documentation package.
Most homeowners stop at step 1. Don't.
2.5.8 Common questions
"Should I just take the ACV check and DIY?" Sometimes — if the loss is small and you can do the work cheaper than the RCV figure. But you forfeit the depreciation. Math it out.
"What if my contractor charges less than the carrier's estimate?" Many policies pay the lesser of (a) actual repair cost or (b) policy limit. Saving money on the contractor often means smaller depreciation recovery.
"Can I keep the depreciation if I sell the house before repairing?" Generally no. Recoverable depreciation requires completed repairs. Some carriers allow a buyer to inherit the right; most don't. Check your policy.
"What if the repair takes longer than 180 days?" Most policies allow extensions for cause (contractor backlog, supply chain, etc.). Document the delay reason and request the extension in writing.
2.5.9 Action steps
- Find your Loss Settlement provision in the policy. Read it.
- Identify whether your dwelling is RCV or ACV (and any roof-specific override).
- Check if you have Replacement Cost on Contents endorsement. If not, add at next renewal.
- If you took an ACV check on a past claim: do you have time + documentation to recover the depreciation? Check the deadline.
Next: 2.6 Ordinance and Law (Code Upgrade) Coverage.
Educational. Not legal advice. Specific loss settlement language varies materially by carrier, form, and endorsement. Verify against your own policy.