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Flood Insurance RCV vs ACV – A Flood Nerds™ Explains

We often get asked if the flood policy we quote is Replacement cost or Actual cash. This post will hopefully clear up the question. If you have further questions or want to speak with a flood nerd feel free to call us at 1-866-990-7482.

Dear Customer,

I understand that choosing the right flood insurance coverage for your property can be confusing, especially when an understanding the difference between Actual Cash Value (ACV) and Replacement Cost Value (RCV). I am here to help clarify these terms and guide you to a great choice for flood insurance coverage for your home, property, and personal items.

Actual Cash Value (ACV) is the amount that your insurance company will pay you in the event of a claim, representing the current market value of the insured item. This value considers factors like depreciation and wear and tear. In simpler terms, it’s the value of your personal property if you were to sell it today.

Replacement Cost Value (RCV), on the other hand, is the amount needed to fully replace your insured property with a similar, brand-new item without considering depreciation or wear and tear. This value represents the cost of buying the same or an equivalent item at today’s prices.

Let’s consider a couple of examples to illustrate the difference between ACV and RCV for your home (the building and contents):

  • Example 1: Building – Suppose a flood damages your house, and it turns out that the cost to replace it fully is now $350,000, although it was built in 1984. If you are only insured for $200,000, you’ll activate the actual cash value (ACV) on your claim, as you didn’t cover the full replacement cost value (RCV). Say the total damage caused is $100,000, i.e., the cost to repair or replace the drywall, flooring, mechanicals, baseboard, etc. ACV coverage may give you a payout of around $85,000 because the adjuster uses a complex formula that factors in the age and condition of the home before the loss. On the other hand, RCV coverage would provide the full claim amount of $100,000, which you need to fix or replace your damaged property. Both ACV and RCV will have the deductible.

In most cases with the private flood insurance to guarantee that you are eligible for RCV, it is critical that you insure your property for its full replacement cost and keep the values updated annually. It is important to note that with an NFIP policy,  will only pay on ACV if your property is a second home or rental if the home is your primary, then the NFIP will pay out on RCV. Additionally, most flood insurance policies always pay ACV for contents we do have some that will pay RCV for extra prmeium if this is important to you,, please speak to your flood nerd.

Also those for all commercial properties, or properties that create revenue (aka rentals), most policies typically only cover  on ACV. If RCV is important to your coverage you need to speak to your flood nerd about this requirements so we can find a flood insurance policy for you. you will always need to read the policy jacket to see how the claim will be settled.

Regarding trying to fill the insurance coverage gap, RCV is the better choice because it compensates you for the full cost of replacing your damage. But some flood insurance polcies will only pay ACV so again you need to read the policy language carefuly and if RCV coverage is really important let your flood nerd know so we can use this when shopping for your coverage options.  RCV option typically comes with a higher premium, it provides the broader protection to replace the damaged home you’ve worked hard for without worrying about out-of-pocket expenses.

ACV coverage, on the other hand, usually comes with a lower premium, but offers less protection as you will have to plan on paying out of pocket to fill in any gap that’s not covered.

I hope this explanation has made the difference between ACV and RCV coverage more understandable. Please feel free to reach out with any further questions or concerns, and I will be happy to assist you in choosing the best insurance coverage for your [product].

Best regards,

Robert, Caleb, Susie, Taylor
Your flood nerds

And if you want to save money on your flood insurance let us do your shopping.


Flood Nerd to Lisa F (OR):

Hi Lisa,

Thanks for reaching out, I have exciting news, your property is pre-approved!!

COVERAGE OF $200,000 for the building with a $5,000 Deductible  (no personal property coverage) at a yearly Premium of $444.78

Lisa F (OR) to Flood Nerd:

Replacement cost or cash value?

Flood Nerd to Lisa F (OR):

Hi Lisa, fantastic question.

I want to be able to answer your question, and we have found that there is a misunderstanding about what RCV and replacement costs are.

It shoulds like you have some understanding. Can you help me know what exactly you are asking so I can make sure I answer your question?

Replacement cost and actual cash take on a different meaning with the Homeowner (HO) or Dwelling policy (DP) than what it means for flood insurance. 

Suppose you are fimmular with the government flood policy (NFIP). In that case, you understand that for a second home (in this case, your rental), the government policy only pays on Actual cash value (aka they will depreciate your property on your claim). If this were your primary home, the government policy would do RCV (not depreciate your property on your claim). 

The private flood (this quote we got for you) doesn’t depreciate for a second home. If you cover your home at $200K and the damage is at $200k, you will get that amount minus the deductible. The main difference between a standard HO or DP policy and a flood policy is that you will get up to the coverage you purchase with a flood policy. For instance, if you have damage of $250K, you would only get the amount you insured which is $200K. I hope that clears up your questions. Do you want to increase the coverage since you are a savvy insurance consumer to ensure your risk is covered?

Let me know if you have further questions at 1-866-990-7482 or would like to discuss what your question was asking if this email didn’t quite cover it. 


Lisa F (OR) to Flood Nerd:

You answered my question! How do I get the flood insurance policy?

Flood Nerd to Lisa F (OR):

Hi Lisa, wonderful; my colleague Susie will be sending you an email with the next steps. Thanks for the honor of working with you on your flood insurance policy!!


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