Replacement cost (RCV) pays what it costs to replace a damaged item with a new equivalent today, with no deduction for age or wear. Actual cash value (ACV) pays the current market value, factoring in depreciation. RCV is the better setting on a homeowners policy. A fire destroys an eight-year-old sofa you bought for $1,200: RCV pays roughly $1,500 to replace it today, ACV pays around $400 after depreciation. See full definitions on our Insurance Terms page at /insurance-terms.

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