# Replacement Cost vs Actual Cash Value

*Insurance — Finicade finance glossary*

Replacement cost pays what it takes to buy a new equivalent; actual cash value pays that minus depreciation. On a ten-year-old roof the difference can be most of the claim. Actual cash value policies are cheaper and are what many people discover they hold at the worst possible moment. For contents especially, replacement cost is usually worth the extra premium.

**Also known as:** replacement cost, actual cash value, ACV

**Related terms:** [Homeowners Insurance](https://finicade.com/glossary/homeowners-insurance), [Depreciation](https://finicade.com/glossary/depreciation), [Insurance Claim](https://finicade.com/glossary/claim), [Policy Limit](https://finicade.com/glossary/policy-limit), [Comprehensive vs Collision Coverage](https://finicade.com/glossary/comprehensive-vs-collision-coverage)

Source: https://finicade.com/glossary/replacement-cost-vs-actual-cash-value