Two of the most misunderstood insurance terms are Actual Cash Value and Replacement Cost Value.
Understanding the basics of these terms will help you understand some of your insurance paperwork. Generally speaking the ACV is smaller than the RCV number. In most policies you get paid "recoverable depreciation" after you do the work or replace the damage items. This is generally the difference between RCV & ACV . (RCV-ACV=Recoverable Depreciation)
Understanding ACV & RCV
Actual Cash Value (ACV) - Cost of replacing damaged or destroyed property with comparable new property, minus depreciation and obsolescence. For example, a 10-year-old sofa will not be replaced at current full value because of a decade of depreciation.
Replacement Cost Value (RCV) - The dollar amount needed to replace damaged personal property or dwelling property without deducting for depreciation but limited by the maximum dollar amount shown on the declarations page of the policy.