The difference between replacement cost value and actual cash value is outlined for policyholders in the Summary of Coverage resource and should be explained to your clients while discussing what coverage may be appropriate for them. This will prevent surprises at the time of a claim and ensure that your clients understand how claims are paid. A Standard Flood Insurance Policy will cover the physical damage to a building either up to the replacement cost value (RCV) or the actual cash value (ACV), depending on the eligibility rules outlined below.

For a building to be eligible for RCV:

• The building must be a single-family dwelling
• The building must be the principal residence at the time of loss. This means that the policyholder or policyholder’s spouse must have lived at the residence for either 80% of the 365 days immediately preceding the loss or 80% of the period of ownership, if less than 365 days
• The coverage on the building must be at least 80% of the full replacement cost of the building OR the maximum amount of insurance coverage available under the NFIP

For a policyholder’s contents, claims are always settled on an actual cash value (ACV) basis.