An actual cash value (ACV) policy pays for a damaged roof based on what the roof was worth at the time of the loss, which means its age and wear are subtracted. That is different from replacement cost coverage, which is based on the cost to replace the roof with a new one, and the gap between the two can make an ACV roof loss cost the homeowner a lot more.
This page explains the idea in general terms. It is not insurance or legal advice. Policies differ, so read yours and ask your agent.
What does ACV mean?
Actual cash value is generally described as replacement cost minus depreciation. Depreciation reflects the age and condition of the thing being paid for. A roof that is near the end of its expected life has been depreciated a lot, and a newer roof has been depreciated less. Policies and insurers use different methods to calculate it, and some policies handle roofs differently from the rest of the house.
How is it different from replacement cost?
| Actual cash value (ACV) | Replacement cost (RCV) | |
|---|---|---|
| Based on | Value of the roof as it was, after depreciation | Cost to replace with comparable new materials |
| Older roof | Payment tends to be lower because more depreciation is subtracted | Payment is based on the new roof cost, subject to policy terms |
| Some policies | May pay depreciation back later if you repair, depending on terms | May pay in stages, depending on terms |
| Key question | How is depreciation calculated for my roof? | What does my policy need me to do to receive the full amount? |
Some policies apply ACV to roofs even when the rest of the house is covered at replacement cost. That is one of the details worth checking.
A hypothetical example
The numbers below are illustrations only. They are not a quote, an estimate, or what any policy would pay.
Suppose a roof costs $20,000 to replace. Suppose the policy calculates that, because of its age, 60 percent of the roof's value has depreciated.
- Replacement cost: $20,000
- Depreciation at 60 percent: $12,000
- Actual cash value: $8,000
- If the deductible is $2,500: payment before other terms would be $5,500
On a replacement-cost basis, the starting point would be $20,000 before the deductible. The point of the example is not the numbers. It is that the same roof can produce very different payments depending on which method the policy uses, and a bigger share of the cost can land on the homeowner under ACV.
Why can ACV mean a larger out-of-pocket?
- Depreciation reduces the starting amount.
- The deductible comes off after that.
- The replacement still costs what it costs, so the difference falls to the homeowner unless the policy returns depreciation later.
Our owner, Jeremy Hays, has described adjuster meetings where an actual cash value policy came with a deductible close to sixteen thousand dollars. His point is that the fine print is where homeowners get surprised. A tough policy can leave a heavy out-of-pocket even when the roof is clearly damaged.
Where to find it in your policy
- Open the declarations page and the full policy.
- Look for "actual cash value", "replacement cost" and "roof surface" or "roof payment schedule".
- Check whether roofs are treated differently from the dwelling in general.
- Check how depreciation is calculated and whether it can be recovered.
- Check the wind and hail deductible, which can be a dollar amount or a percentage.
Questions to ask your agent
- Is my roof covered at actual cash value or replacement cost?
- How is depreciation calculated on my roof?
- Can depreciation be recovered after the work is done?
- What is my wind and hail deductible, and how is it calculated?
- Are there roof age limits or payment schedules in my policy?
What a roofer can and cannot tell you
A roofer can describe the age and condition of your roof and what replacement involves. A roofer cannot tell you what your insurer will pay, and nobody should promise you an outcome. Your policy and your insurer decide that.
Frequently asked questions
Is actual cash value the same as market value? No. For a roof it generally means replacement cost minus depreciation, not what the roof would sell for.
Does ACV always mean I get less? It generally means a lower starting amount on an older roof, but terms vary. Some policies recover depreciation after repairs are done.
Can I switch from ACV to replacement cost? That is a question for your agent. Changes usually apply going forward and not to a loss that has already happened.
Does a newer roof depreciate less? Generally yes, because less of its expected life has been used. How your insurer calculates it is in your policy.
Does a Class 4 roof change this? Some insurers offer premium discounts for impact-rated roofs. Ask your agent whether that applies to your policy.
Talk to us about your roof
Total Roof Protection OKC can inspect your roof and explain its age and condition. Call 405-415-5841 to schedule an inspection. An inspection tells you about the roof. It does not predict or replace your insurer's decision.