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Actual Cash Value vs. Replacement Cost: Navigating the Policy

Standard replacement-cost provisions on commercial property forms often offer the insured the option to accept settlement on an actual-cash-value (ACV) basis, but the insured can later opt to receive the replacement-cost amount.

By Susan Massmann | Updated on May 03, 2012

This can cause some confusion.

The policy usually provides a time period for notifying the carrier that the insured intends to make a claim for the replacement cost. The insured must actually make the repairs before the replacement-cost amount is paid. But the amount of time given to make the repairs is generally some variation on “as soon as reasonably possible” after the loss or damage.

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