Definitions, in one paragraph
Replacement cost (RC) pays what it costs today to replace damaged property with new property of like kind and quality. Actual cash value (ACV) pays replacement cost minus depreciation for age and wear. RC restores you; ACV reimburses you for what the damaged property was worth at the moment of the loss.
Where RC and ACV show up in Minnesota policies
- Dwelling (Coverage A): Almost always RC on modern policies — but verify.
- Personal property (Coverage C): Often defaults to ACV. RC is an inexpensive add-on.
- Roof: The most variable. Carriers increasingly default to ACV or schedules for older roofs.
- Detached structures: Sometimes ACV; check the form.
Worked examples
Example 1 — 12-year-old asphalt roof, $25,000 RC
Under an RC policy, after a $2,500 deductible, the carrier pays $22,500. Under an ACV policy with a 25-year useful-life assumption, the depreciation is roughly 48%, so RC ($25,000) − depreciation ($12,000) = $13,000 ACV − $2,500 deductible = $10,500. The homeowner covers ~$14,500 out of pocket.
Example 2 — 8-year-old laminate flooring damaged by water backup
On RC, the carrier pays the cost to install new flooring of similar quality. On ACV, with a 20-year useful life, the carrier pays roughly 60% of replacement cost.