Use dotted terms for definitions. You can also browse the glossary.
Before you decide
- ACV accounts for depreciation under the applicable method.
- Replacement-cost payment can depend on repair conditions and timing.
- Check individual property exceptions, especially roofs.
Separate value from payment timing
TDI distinguishes replacement cost from depreciated actual cash value. A rental or commercial form needs its own review, including valuation method, limits, insurance-to-value conditions and specific endorsements. A replacement-cost building may still have a different roof or contents provision.
Ask whether the initial payment is depreciated, what allows recovery of any withheld amount and which deadlines apply. Do not assume all depreciation is recoverable or that every form pays the full replacement amount before work.
Worked repair example
Illustrative covered repair cost: $30,000. Assume $9,000 depreciation and a $3,000 deductible. A simple ACV calculation is $30,000 − $9,000 − $3,000 = $18,000. If the contract permits recovery of the entire $9,000 after qualifying repairs, total payment could become $27,000, subject to limits and all other conditions.
The owner may need cash before the later payment arrives. This example does not assign a depreciation percentage to any real roof or guarantee recovery. Ask the adjuster for the calculation and the policy basis.
Read exceptions and conditions
| Item | Question |
|---|---|
| Roof | Replacement, ACV, age schedule or other endorsement? |
| Owner contents | Which valuation applies to furniture and equipment? |
| Repair obligation | What must be repaired or replaced, and by when? |
| Code upgrades | Separate ordinance/law amount or excluded cost? |
| Lender interest | Who receives funds and what release process applies? |
Use the comparison in a purchase decision
Compare two proposals using the same hypothetical repair scope and actual quoted terms. Separate the premium difference, deductible, nonrecoverable depreciation and temporary funding need. The cheapest annual premium may require more capital after a loss.
Keep current estimates and evidence of major replacements. Review valuation at renewal and after substantial work. Purchase price and the loan balance do not independently establish reconstruction cost.
Sources & scope
- Texas Department of Insurance: Replacement cost or actual cash value?
Residential valuation explanation, January 24, 2024. A rental or commercial form may use different settlement conditions.
- Texas Department of Insurance: Homeowners insurance and disaster claims
September 15, 2025. Evidence, temporary repairs and staged-payment context. Texas deadlines are not national rules.
Sources checked October 24, 2026. General descriptions do not replace the policy, endorsements, declarations or an insurer’s coverage determination. Examples are hypothetical unless explicitly identified otherwise.
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