How to Interpret Your Homeowner Insurance Estimate: A Clear Guide for Property Owners
- Joseph Paoletti
- 3 days ago
- 6 min read
Navigating an insurance estimate after damage to your home can feel overwhelming—especially if you’re trying to make sense of the technical terms, columns of numbers, and industry lingo. Whether you’re dealing with roof damage, water intrusion, or a fire, it’s critical to understand your insurance estimate to make sure you’re receiving everything you’re entitled to.
Firstly, within the body of the estimate are often the shorthand "R&R" and "D&R". These are short for "remove and replace" and "detach and reset" respectively.
For example, an estimate may list removing and replacing 800 square feet of siding and (in order to do so) detaching and resetting 3 pairs of shutters.
Other than that, I recommend flipping over to the summary page first. This page gives you all the important bottom lines and once you understand what each of the items on the summary page represents, you'll be better able to interpret your entire estimate.
Below is a breakdown of the key terms and concepts you’ll find in a homeowner insurance estimate, especially on the summary page.
1. ACV – Actual Cash Value
Definition: ACV stands for Actual Cash Value, which is the depreciated value of an item or structure. This means your insurer takes the cost of replacing an item and subtracts depreciation based on age, condition, and expected lifespan.
Example: If a 15-year-old roof would cost $10,000 to replace today but has depreciated by $4,500, your ACV is $5,500. This is typically the first payment you receive from your insurance company.
Note: Homeowners are often confused about this. When a customer calls to tell me that they've received their estimate, but are confused about the amounts, I ask them what the biggest number is on the estimate summary page. That’s the amount of their approval, also known as the replacement cost value. That's the number that matters the most.
2. RCV – Replacement Cost Value
Definition: RCV stands for Replacement Cost Value, which is the amount it would take to repair or replace your damaged property with similar materials at today’s prices—without deducting for depreciation.
Example: If your damaged hardwood floor costs $8,000 to replace, that $8,000 is the RCV—even if the floors were 10 years old. You are eligible to receive this full amount, but often in two parts: ACV first, then recoverable depreciation after the work is completed.
3. Recoverable Depreciation
Definition: This is the portion of the depreciation that you can recover once the repairs are completed and you provide proof (invoices, photos, or contractor documents). Recoverable depreciation bridges the gap between the ACV payment and the full RCV.
Important Tip: Don’t leave money on the table—submit proper documentation to claim this amount once work is finished. This is a processs we are very familiar with, as should any contractor that performs an extensive amount of insurance work.
Note: Most of us are programmed to think of depreciation as something that gets subtracted to our own detriment. But recoverable depreciation really just amounts to what the insurance company witholds until the work gets completed. This is why it’s also sometimes referred to as depreciation holdback.
4. Non-Recoverable Depreciation
Definition: This depreciation cannot be claimed later, often because of the terms of your policy. This is common in Actual Cash Value-only policies, or when an item is deemed not worth restoring in full due to its condition or age.
Example: If a 20-year-old carpet is considered beyond its usable life, your insurer might pay only ACV and label the rest as non-recoverable.
Note: This is relatively rare since most policies will cover the total replacement cost value (RCV). However, some policies are ACV with specific types of claims. For example, we've run into Homesite policies where roof claims are considered ACV. Unfortunately, the customer typically discovers this the hard way.
5. Overhead and Profit (O&P)
Definition:This represents the general contractor's 10% overhead (their business expenses) and 10% profit (their earnings). When complex trades or multiple subcontractors are needed (typically 3 or more), insurance companies may add this to your claim.
Why It Matters: If your repair requires roofers, carpenters, and electricians, you’re likely entitled to O&P—even if you’re acting as your own general contractor. Be sure to ask your adjuster about this if it’s not listed in the estimate.
Note: There is no strict universal rule about what necessitates overhead and profit (O&P) to be paid. It should be applied to any claim that necessitates a general contractor to perform all the work. However, the decision often comes down to the discretion of the adjuster. A claim consisting of several trades or a claim involving "complexity" are both reasons cited for adding O&P to a given settlement amount, but there is very little consistency in how these vague guidelines are applied. Because of this, it tends to be one of the biggest points of contention between adjusters and contractors.
6. PWI Items – Paid When Incurred
Definition: PWI stands for Paid When Incurred. These are costs the insurance company will reimburse only when you show proof that you’ve actually paid for them. Common PWI items include:
Dumpster rentals
Permits
Engineering reports
Temporary housing (in some policies)
Code upgrade items not currently installed on the home
Pro Tip: Save all receipts and invoices. Submit them to your adjuster to get reimbursed for any PWI items included in your estimate.
Note: A PWI summary is often listed on a separate summary page. When calculating the total approval amount, you need to add both summary RCV amounts together.
7. Deductible
Definition: The deductible is the amount you are responsible for paying out of pocket before your insurance company issues payment. It is subtracted from your total claim payout—not added to it.
Example: If your total approved repairs cost $12,000 and you have a $1,000 deductible, your insurance company will pay $11,000. This applies to each claim, not annually.
Important Tip: Deductibles can be a flat amount (e.g., $1,000) or a percentage of your home's insured value (common with wind, hail, or hurricane claims). Always check your policy so you're not caught off guard.
Note: Since the deductible is taken out of the claim by the insurance company, the homeowner pays the contractor the deductible directly.
9. Net Claim
Definition: In many insurance estimates, especially initial summaries, Net Claim refers to the amount actually being paid in the first check. It typically includes the Actual Cash Value (ACV) minus your deductible. This is not the total amount the insurer will pay overall, but rather the portion being paid upfront.
Example: If your Replacement Cost Value is $18,000, depreciation is $5,000 (with $4,000 of it recoverable), and your deductible is $1,000, your Net Claim in the first payment would be $12,000—that’s the ACV ($13,000) minus your deductible ($1,000).
Why It Matters: It’s easy to mistake the “Net Claim” line on the first estimate as your total settlement. But it's just the initial payment, and more money (recoverable depreciation, O&P, etc.) may still be owed to you. Always review the full estimate and payment breakdown to understand what’s left to claim.
Final Thoughts
Understanding the terminology in your insurance estimate empowers you to make better decisions and avoid being shortchanged. Always review your policy for details on depreciation and coverage limits, and if you’re unsure, consider consulting a public adjuster or contractor experienced in insurance restoration work.
Remember: Your estimate is not just a report—it’s the foundation of your financial recovery. Make sure you understand it, challenge anything unclear, and follow up for all the funds you’re owed.
Need help reviewing your estimate? Reach out to us for a complimentary consultation—we’re here to advocate for homeowners every step of the way. We've navigated hundreds of insurance claims. Put our expertise to good use!
No matter where you are in the claims process, if you've sustained storm damage to your roof or siding and live within our service area, call us today at (877) 846-9566 or fill out the form below to get started. Or, you can schedule your free inspection online.
