Property claims glossary
What is replacement cost value (RCV)?
Replacement cost value (RCV) is the cost to repair or replace damaged property with materials of like kind and quality, with no deduction for depreciation. It is usually the gross total of the estimate, the starting point from which depreciation, the deductible and any limits are taken.
Worked example · fictitious claim
An estimate for a kitchen water loss totals $30,000 RCV, with $6,000 of depreciation and a $1,000 deductible. The first payment is $30,000 − $6,000 − $1,000 = $23,000. Once repairs are finished, the $6,000 of recoverable depreciation is released, bringing the total paid to $29,000.
How it affects a settlement
RCV is the most a replacement cost policy will pay for the damaged items, subject to the coverage limit and the deductible. Most policies pay the full RCV only after the work is completed, so RCV tells you what the claim can reach, not what is paid on day one.
In practice
The cost to repair or replace damaged property with materials of like kind and quality, without deduction for depreciation. RCV is what the estimate totals; what the carrier actually owes depends on the policy's settlement provisions, endorsements, and deductible, which is where reconciliation errors creep in.
Related
Actual cash value (ACV) · Depreciation · AI property claims review · property claims glossary