ACV (Actual Cash Value)

The Number on the First Check

Actual Cash Value (ACV) is the depreciated value of damaged property and the single most important number on a residential insurance claim. ACV is calculated by subtracting depreciation from replacement cost value (RCV), and it determines how much the homeowner receives before any work starts. On a 10-year-old roof with an $18,500 RCV and 40% depreciation, the ACV is $11,100. Subtract the deductible and you have the first check the homeowner sees.

That first check has to cover enough for the contractor to start work. If it does not, you are either floating the job out of pocket or waiting on a supplement before you can schedule a crew.

How ACV Gets Calculated

The carrier calculates ACV by applying depreciation to each line item in the Xactimate estimate. Depreciation rates depend on the age, condition, and expected useful life of each component. Here is where it gets contested: carriers sometimes apply a blanket depreciation percentage across the entire claim instead of depreciating each item individually. That is a supplementable error.

Component	Age	Typical Depreciation	ACV Impact
Architectural shingles	5 years	15-20%	Moderate
Architectural shingles	15 years	50-60%	Severe
Gutters (aluminum)	10 years	25-35%	Moderate
Ridge vent	3 years	5-10%	Minimal

Every line item should have its own depreciation rate. If the adjuster applied the same percentage to new gutters and a 20-year-old roof, challenge it.

ACV-Only Policies: Know Before You Scope

Some homeowners carry ACV-only policies, and this changes everything. On an ACV-only policy, the depreciated amount is all the homeowner gets. There is no second payment for recoverable depreciation. The gap between the ACV payment and the actual repair cost comes out of the homeowner's pocket.

Before you sign a contract, check the declarations page. If the policy is ACV-only, the homeowner needs to understand the shortfall upfront. Contractors who skip this step end up chasing payments that are never coming.

What to Do When ACV Feels Low

If the ACV payment looks short, pull up the carrier's depreciation schedule and audit it line by line. Check that each component was depreciated at a rate that matches its actual age and condition. If the carrier used a blanket rate or over-depreciated newer components, file a supplement with documentation. Photographs showing the pre-loss condition of individual components strengthen your argument. The goal is to close the gap between the ACV payment and the real cost of starting the job.

Further reading

• RCV vs ACV: What Every Contractor Must Know
• Recoverable Depreciation Explained: A Contractor's Guide
• Depreciation Calculator