Property · Insurance Term
Actual Cash Value (ACV)
Definition
Actual cash value (ACV) is a way of valuing a loss that pays the cost to repair or replace damaged property minus depreciation for age, wear and condition. It pays less than replacement cost, sometimes much less, for older property such as roofs.
In Plain English
Policies settle losses in one of two main ways. Replacement cost pays to repair or replace with new property of like kind and quality. Actual cash value starts from that same cost and subtracts depreciation. Many policies and courts measure ACV this way, though your policy's wording controls.
ACV matters most on roofs, older buildings and equipment. A 20-year-old roof may be nearly fully depreciated, so an ACV settlement can be a small fraction of the cost of a new roof. Some policies pay ACV only on the roof, through a roof surfacing payment schedule or similar endorsement, while paying replacement cost on the rest of the building.
Even on a replacement cost policy, insurers commonly pay ACV first and the remaining amount, called recoverable depreciation, after repairs are complete. That is why keeping repair invoices and finishing work within the policy's time limits matters.
Not sure how your policy handles this? Have us review it, or get a quote.
Example
Hypothetical: hail destroys a roof that would cost $200,000 to replace. The roof is 15 years into an expected 20-year life, so the adjuster applies 75% depreciation. ACV is $50,000. With a $25,000 deductible, the payment would be $25,000, compared with $175,000 on a replacement cost basis.
Why It Matters for Texas Property Owners
Texas had more major hail events than any other state in 2025, so roof valuation is one of the biggest coverage decisions a Texas owner makes. Many Texas commercial policies now pay ACV on older roofs; check the declarations and endorsements before storm season, not after.
What to Watch For
- Check whether your policy values the building, the roof and contents at replacement cost or ACV.
- Look for roof schedules or ACV-on-roof endorsements tied to roof age.
- Ask how long you have to complete repairs to collect recoverable depreciation.
- Keep records of roof replacement dates and repairs; they affect depreciation.
Common Questions
Is actual cash value the same as market value?
Not usually. Market value reflects what a buyer would pay, including land and location. ACV for insurance usually means repair or replacement cost minus depreciation, though your policy's wording controls.
Can I switch from ACV to replacement cost?
Often, yes, at renewal or by endorsement, though insurers may decline for older roofs or charge more. Ask your agent to quote both so you can compare the premium against the gap at claim time.
Sources
Last updated October 14, 2026 · Primesure editorial team · How We Write