You might be thinking your insurance paperwork looks like rocket science! VernCo will walk you through some terms and definitions to help you feel more equipped and confident when reading your “Scope Of Work” from your insurer.
RCV= Replacement Cost Value
RCV is the total cost of replacing your home back to pre-storm condition, using the current fair market value. The total RCV should cover the entire scope of work, leaving the deductible as the maximum out-of-pocket (excluding upgrades) for you as the homeowner. Your deductible should be the only cost you incur.
Is the amount of life that has been used from your dwelling’s product(s). This amount is always withheld by your insurance company until all work is completed and invoices turned by VernCo into your insurer.
ACV= Actual Cash Value
Is the value of the current age and condition of your damaged property. Most insurance companies will pay you the ACV amount before work is started. To make things simple, the ACV is the Depreciation subtracted from the RCV.
Example: If you have a 30 year Limited Life roof and its 15 years old, 50% of its useful life is gone. If a storm causes $10,000 (RCV) worth of damage(s) to your roof, your insurance company is going to depreciated the roof 50% (the insurance company will subtract out your deductible from your ACV (you have a $1,000 deductible)) leaving you with an ACV payment of $4,000. After work is completed and VernCo sends in final invoices to your insurance company, they will release the remaining $5,000 in depreciation.