ACV Policy vs RPS Policy

An “ACV” (Actual Cash Value) and an “RPS” (Replacement Cost with Partial Settlement) schedule are both methods used by insurance companies to determine how much they will pay out for a claim, particularly for property damage.

Here’s the difference between the two

Actual Cash Value (ACV):

  • ACV takes into account depreciation. It’s the value of the damaged property at the time of the loss, considering factors like age, wear and tear, and obsolescence.
  • When you file a claim with an ACV policy, the insurance company will assess the current value of the damaged property, subtract depreciation, and pay you the resulting amount.
  • ACV policies typically result in lower payouts compared to the cost of replacing the damaged property with new items.

Replacement Cost with Partial Settlement (RPS) schedule:

  • RPS is a combination of Replacement Cost Value (RCV) and Actual Cash Value (ACV). It provides coverage for the full replacement cost of damaged property, but with limitations or exclusions on certain items or categories.
  • With an RPS schedule, the insurance company agrees to pay the replacement cost for covered items up to a certain limit. However, they may apply depreciation or other factors for certain categories of items, resulting in a partial settlement.
  • This approach is often used for high-value items or categories where the full replacement cost may be prohibitively expensive or where there’s a higher risk of loss.

In summary, while both ACV and RPS schedules involve assessing the value of damaged property, ACV considers depreciation and pays out accordingly, while RPS combines replacement cost coverage with limitations or exclusions on certain items or categories, resulting in a partial settlement.