What is 'replacement cost' versus 'actual cash value' (ACV) in property loss settlement?

These are the two main methods of loss valuation. Replacement Cost: what it would cost today to replace the damaged or destroyed property with new property of like kind and quality, regardless of the age or condition of the original. Actual Cash Value (ACV): replacement cost minus depreciation for age, wear and tear, and condition. A 10-year-old roof at the end of its life has a high replacement cost but low ACV. Most homeowners policies write Coverage A and B on replacement cost basis (sometimes with a co-insurance requirement) and Coverage C on ACV unless replacement cost coverage is added by endorsement. The difference can be significant — a 15-year-old appliance might cost $1,500 to replace but have $400 ACV. Some policies pay ACV initially with the balance to replacement cost paid after actual replacement is made.