Replacement cost vs.
actual cash value.

Replacement Cost Value (RCV) pays what it costs to rebuild or replace the damaged property with new materials of like kind and quality — without deducting for age or depreciation. Actual Cash Value (ACV) pays the depreciated value of the damaged property at the time of loss: the replacement cost minus depreciation based on age, condition, and expected useful life. Example: a 10-year-old roof with a 20-year lifespan has 50% of its useful life remaining. Under ACV, the insurance company pays 50% of the replacement cost. Under RCV, they pay the full replacement cost. The difference can be tens of thousands of dollars on a Florida roof claim.

Depreciation is calculated by the insurance adjuster based on the item's expected useful life minus the years already used. For roofs, this is typically calculated per material: asphalt shingles have a 20–25 year useful life in Florida's climate; older roofs receive steeper depreciation. The same logic applies to flooring, HVAC systems, appliances, and building components. On an RCV policy, the insurance company pays the ACV first (the depreciated amount), then releases the 'recoverable depreciation' — the withheld portion — after you provide receipts proving the repair or replacement was completed. You must actually complete the repairs to collect the full RCV payment.

On an RCV policy, the insurer first issues the ACV payment (replacement cost minus depreciation). The 'withheld depreciation' or 'recoverable depreciation' is the difference between the ACV paid and the full RCV. Once you complete repairs and submit receipts, the insurer releases the withheld depreciation as a supplemental payment. Example: RCV is $40,000; ACV is $24,000; withheld depreciation is $16,000. You receive $24,000 minus your deductible upfront, complete the repairs, submit receipts for $40,000 worth of completed work, and receive the remaining $16,000. If you do not complete repairs, you only collect the ACV payment.

For most Florida homeowners, RCV is worth the additional premium. Florida's hurricane and water damage risk is among the highest in the country — claims are frequent and the gap between RCV and ACV can be massive, especially for older roofs. The premium difference for RCV vs. ACV coverage is typically $200–$600 per year depending on the insurer and risk profile. After a major loss, the difference in your claim payout can be $20,000–$60,000 or more. Exception: if you plan to sell the home within 2–3 years and are not willing to complete repairs to collect the withheld depreciation, ACV at lower premium may make sense. For long-term homeowners with older roofs or older HVAC systems, RCV is strongly recommended.

Florida roofs are especially affected by this distinction. Asphalt shingles that are 15 years old on a 20-year-rated product may receive only 25% of replacement cost under ACV coverage — leaving the homeowner responsible for 75% of a $25,000 roof replacement out of pocket. On water damage claims, flooring, cabinetry, and building materials all receive depreciation under ACV policies. A kitchen with 12-year-old vinyl plank flooring and 10-year-old cabinets can receive less than half of actual replacement cost under ACV. This is why many Florida homeowners discover after a major claim that their ACV policy leaves a significant funding gap — they assumed 'insurance would cover it' without understanding depreciation.