How Do I Know if My Policy Is ACV or RCV?
Your declarations page says it. Look for the words "actual cash value" or "replacement cost" next to your dwelling coverage.
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Check the dec page wording
The declarations page is the summary sheet the insurer sends with your policy. If it says "replacement cost" next to dwelling coverage, you get the cost to rebuild. If it says "actual cash value," that cost is reduced for the age and wear of what's being replaced, especially the roof.
Roof coverage often differs
Many policies pay replacement cost on the house itself but drop to actual cash value for the roof alone. This shows up as a separate line or an endorsement with its own wording. Read that section by itself instead of assuming it matches the rest of the policy.
What your lender requires
Lenders generally require replacement cost coverage, not actual cash value, because it protects the loan amount if the house is destroyed. The binder you send before closing should show replacement cost on the dwelling so the lender accepts it without questions.
Ask what the number means
If the wording is unclear, ask what the dwelling coverage amount is based on. It could be an estimated cost to rebuild the house, or the current market value minus depreciation. Those are different figures, and the answer tells you which type you have.
The wrong wording can cost you at closing
A binder showing actual cash value can get rejected by your lender, or leave you paying the difference to rebuild after a loss. Comparing policies now shows which ones write replacement cost from the start.
What's the difference in what you actually get paid
Say a fire destroys the house. If the dwelling coverage is replacement cost, the insurer pays what it costs to rebuild it the way it was, up to the policy limit. If it's actual cash value, the insurer subtracts depreciation first. A 20-year-old roof isn't worth what a new one costs. The payout reflects what that roof was worth the day before the fire, not what it costs to put on a new one. The gap between those two numbers is often tens of thousands of dollars, and it comes out of pocket.
Depreciation gets applied to almost everything with a lifespan. Roofing, siding, flooring, water heaters, the furnace. An adjuster goes through the house and assigns an age and a condition to each of these, then reduces the payout accordingly. This is part of why actual cash value policies tend to cost less upfront. The insurer is taking on less risk, because it isn't promising to replace old things with new ones at full price.
Some policies split the difference with what's called replacement cost with a recoverable depreciation holdback. The insurer pays the depreciated amount first. Then it pays the rest once the repair or rebuild is finished and receipts are submitted. This still ends in full replacement cost, but it means covering the upfront cost of repairs before being reimbursed for the depreciated portion. The declarations page or the policy wording should say whether depreciation is recoverable, since that affects how much cash is needed during a claim.
None of this is something to work out after a loss happens. The type of coverage is set when the policy is written, so the time to know which one applies is before closing, not after a pipe bursts or a storm takes the roof. If the binder going to the lender shows actual cash value anywhere in the dwelling coverage, that's worth resolving before signing anything. Switching policies after closing means starting the whole process over while still living with whatever coverage is already in place.
What happens to personal belongings coverage
Dwelling coverage is only part of the policy. Most homeowners policies also cover personal property, the furniture, clothes, electronics and everything else inside the house, and that coverage can carry a different valuation than the dwelling does. It's possible to have replacement cost on the house itself and actual cash value on everything inside it. The declarations page usually lists personal property as its own line item, separate from dwelling coverage, so check that line specifically rather than assuming it matches.
A couch bought eight years ago has a replacement cost of what a similar couch sells for today. Its actual cash value is a fraction of that, based on age and wear. Electronics depreciate fast too. A five-year-old television is worth very little under actual cash value, even though replacing it costs close to what a new one runs. If personal property is on actual cash value, a claim after a fire or theft pays out a lot less than what it costs to replace what was lost.
Some insurers sell replacement cost on personal property as an add-on rather than including it by default. If the base policy only offers actual cash value for belongings, it's worth asking whether replacement cost can be added before closing. The cost difference shows up in the premium, but so does the gap in what gets paid out after a claim. This is a separate decision from the dwelling coverage question, and it's easy to assume one setting applies to both when it doesn't.
The binder sent to the lender typically only needs to show dwelling coverage meets the loan amount, so personal property valuation won't hold up closing the way dwelling coverage can. That makes it easy to skip over. Reading that section of the policy now, while there's still time to change it, beats finding out after moving in that a houseful of belongings is insured for less than it would cost to replace them.
Before you sign anything
Pull up the declarations page and check both lines, dwelling and personal property, for the words replacement cost or actual cash value. If either says actual cash value, ask about changing it before the binder goes to your lender.
