When your roof is damaged in a storm and the carrier issues a payment, you might notice it's far less than the contractor's estimate. The reason is almost always one of two things: depreciation applied under an Actual Cash Value (ACV) policy, or held-back depreciation under an RCV policy with a recoverable depreciation holdback.
Understanding the difference — and knowing which one your policy uses — is one of the most important things you can do before you file a claim.
What is Actual Cash Value (ACV)?
ACV is essentially what your damaged property is worth right now, accounting for age and wear. Insurance carriers calculate it roughly as:
ACV = Replacement Cost − Depreciation
A 15-year-old roof that would cost $20,000 to replace might have an ACV of $8,000 if the carrier depreciates it heavily. That's the ceiling of what you'd receive on an ACV policy — regardless of what it actually costs to fix.
Depreciation can be calculated using a straight-line formula, a depreciation schedule, or the carrier's internal software (Xactimate and CoreLogic are the two most common). The methodology varies, but the result is the same: you're paid for a portion of the actual repair cost.
What gets depreciated?
Carriers typically depreciate:
- Structural components — roofing, siding, windows, flooring
- Personal property — appliances, furniture, electronics
- Labor — under some policy interpretations, though this is contested in Florida
Florida courts have repeatedly addressed the question of whether labor can be depreciated. The Florida Supreme Court's decision in Citizens Property Insurance Corp. v. Manor House LLC and subsequent appellate cases have shaped how carriers must treat this question. If your carrier is depreciating labor on a Florida claim, that is worth examining with a professional.
What is Replacement Cost Value (RCV)?
An RCV policy pays what it actually costs to repair or replace the damaged item with new materials of like kind and quality — no depreciation deducted from the final settlement.
However, most RCV policies don't pay the full replacement cost upfront. They work in two stages:
- Initial ACV payment — the carrier pays ACV first, holding back the depreciation.
- Recoverable depreciation release — once you actually complete the repairs (or replacement), you submit documentation and the carrier releases the withheld depreciation.
The amount held back is called recoverable depreciation. The total payment (ACV + recoverable depreciation) should equal the replacement cost.
The catch: you have to actually repair
The depreciation holdback is contingent on completing the repairs. If you accept the ACV check and don't repair, you generally cannot claim the holdback later. This is why "pocket the insurance money and live with the damage" can cost you significantly — you've left recoverable money on the table.
Non-Recoverable Depreciation
Some policies — and some line items within RCV policies — designate certain depreciation as non-recoverable. This is common on:
- Older roofs (many Florida policies have age-based ACV provisions for roofs)
- Cosmetic damage exclusions
- Items the carrier classifies as betterment
If your policy has a roof age schedule or an ACV endorsement for roof surfaces, your new roof claim may be settled on an ACV basis even if the rest of the dwelling is covered RCV. This is one of the most common sources of homeowner frustration in Florida.
Florida's Matching Statute
One area where Florida law works in homeowners' favor is the matching requirement. Under Florida case law and the principle of indemnification, carriers generally cannot replace a portion of a structure with visibly mismatched materials when the damaged portion is part of a continuous surface (roofing, flooring, siding, etc.).
If your insurance company wants to replace 12 damaged roof tiles with a discontinued tile color and call it even, that argument may not hold up. The uniform appearance doctrine — widely recognized in Florida — requires the repair to result in a uniform, reasonably matching appearance.
This is an area where having documentation and photos of the pre-loss condition can make a significant difference.
Overhead & Profit (O&P)
One more line item that affects the gap between ACV and what you can actually spend to repair: Overhead & Profit (O&P).
General contractors typically charge a margin — usually 10% overhead and 10% profit — on top of labor and materials. When a claim is complex enough to require a general contractor to coordinate multiple trades, that O&P is a legitimate part of the repair cost.
Carriers sometimes exclude O&P from their estimates, arguing the homeowner can manage the work themselves. In Florida, the standard is generally that O&P is owed when the scope of work meets the three-trades rule — if three or more subcontractor trades are required, a GC is reasonably necessary and O&P should be included.
If your Xactimate estimate doesn't include O&P and your scope involves roofing, interior, and electrical (for example), that's a supplement worth pursuing.
What to Do Right Now
- Find your policy's "Loss Settlement" or "Valuation" section. It will specify ACV or RCV for each coverage category (dwelling, personal property, other structures).
- Check for roof age schedules or ACV endorsements. These are often endorsements or separate pages — not embedded in the main body.
- Read the "Duties After Loss" section. It will tell you the notice requirements, documentation obligations, and timeline for completing repairs and claiming recoverable depreciation.
- Get a complete itemized estimate from your contractor before accepting the carrier's payment. The carrier's Xactimate estimate and a contractor's actual bid should be compared line by line.
Pocket Adjuster can walk you through your policy's loss settlement language, explain how depreciation was applied to your claim, and help you identify whether a supplement is appropriate. Start a free claim to get AI-guided analysis specific to your situation.