RCV, ACV, DEDUCTIBLE & DEPRECIATION EXPLAINED

The deductible is the portion of any insurance claim that the homeowner is responsible for. For example, most deductibles in Texas for a property damage claim are 1% of the assessed value (the dollar amount your home is insured up to) of the home. If your home is worth $100,000.00, the homeowner is responsible for $1,000.00 (1%).

* As of September 1, 2019: “Texas law requires a person insured under a property insurance policy to pay any deductible applicable to a claim made under the policy. It is a violation of Texas law for a seller of goods or services who reasonably expects to be paid wholly or partly from the proceeds of a property insurance claim to knowingly allow the insured person to fail to pay, or assist the insured person’s failure to pay, the applicable insurance deductible.”

Most insurance claims related to acts of God (hail and wind) are costly, and require proper planning and execution to properly restore a home to pre-storm condition. In the state of Texas, payments are split into two checks to ensure the homeowner uses the funds for the repairs, and to also protect the homeowner against dishonest contractors. In an insurance claim scenario, roofing contractors are paid the first portion when the work starts, and the remaining (2nd) portion of the funds after the work is completed.

Check #1: The first check issued to the homeowner is called the “ACV” (actual cash value). This typically comprises of 50-80% of the total funds needed to complete repairs.

How the ACV is calculated

a) RCV (total) – Depreciation (2nd check portion of funds) = ACV

b) Deductible is then taken out of the ACV funds. ACV – Deductible = Check #1 from insurance

Check #2: The second check issued to the homeowner is called the “Depreciation”. This is the 2nd check released AFTER the work is completed by a roofing contractor for the scope of repairs.

How Depreciation is Calculated

a) RCV (total) – ACV – deductible = Depreciation (2nd check)

Should there be items overlooked by the insurance adjuster in the claim, your contractor will submit a supplement to the insurance in regard to receiving more funds to complete the work appropriately. For example, let’s say your roof is 2000 square feet, but the adjuster mistakenly only allowed for 1800 square feet. The contractor would then submit the supplement for the remaining 200 square feet of shingles, underlayment, etc.

Once the supplement is approved, the insurance company will issue an additional (3rd) check to the homeowner, or in some cases will add the supplement total to the depreciation (2nd) check.

We hope this helped in explaining RCV, ACV, Deductible and Depreciation when concerning an insurance claim. If you have additional questions, please contact our office at: 469-458-7663