When it comes to homeowners insurance, Replacement Cost vs. Actual Cash Value (ACV) isn’t just insurance jargon—it can make a big difference when a Texas storm sends a tree through your roof or hail decides your shingles need a makeover.
What Is Depreciation?
Depreciation is simply the decrease in value that happens as something gets older or experiences wear and tear. ACV takes the cost to replace damaged property and subtracts depreciation. Replacement Cost Coverage generally pays the cost to repair or replace covered property at today’s prices, subject to your policy terms and deductible.
A Real-World Roof Example
Imagine a covered storm damages your roof. Replacement cost: $10,000. Your deductible is $2,000.
With Replacement Cost Coverage, the claim could ultimately provide $8,000 toward the replacement.
With ACV, a 10-year-old roof might be valued at $7,000 after depreciation. Subtract the $2,000 deductible, and the initial payment could be only $5,000—leaving you with a much larger out-of-pocket expense.
And that’s why this coverage matters, especially with Central Texas weather. A lower premium today could mean a much larger bill after a claim.
At Dowd Insurance Agency, we help homeowners understand what their policy actually covers—not just what it costs.
Before the next hailstorm rolls through, know whether your home and belongings are insured for replacement cost or actual cash value.
