Your roof is fifteen years old. Hail takes it out. One policy hands you a check for a new roof. The other hands you a check for a fifteen-year-old roof, which is to say a fraction of what the new one costs. Same storm, same house, same coverage limit on the declarations page.
Actual cash value means replacement cost minus depreciation. The insurer prices what it would take to rebuild, then subtracts for age and wear. Replacement cost coverage skips the subtraction and pays what it costs to put it back today, usually in two steps: they pay the depreciated amount up front, and they release the rest once you've actually done the work and sent the invoice.
Check two places on your policy. The dwelling coverage, which is the structure, and the personal property coverage, which is your stuff. They're set separately. Plenty of policies carry replacement cost on the house and actual cash value on the contents, so a burned-out kitchen gets rebuilt and the eight-year-old furniture in it gets paid at garage-sale prices.
Roofs often get their own treatment now. A lot of carriers have moved older roofs onto a separate actual cash value schedule, or onto a payment schedule that steps down by roof age, even when the rest of the dwelling is replacement cost. It'll be an endorsement with a name like roof surfacing payment schedule. Read that one closely.
There's a third setting above replacement cost called extended or guaranteed replacement cost. Extended pays some percentage over your dwelling limit, often 25% or 50%, which matters when construction prices jump after a regional fire or storm and every contractor within a hundred miles raises rates at once. Guaranteed pays whatever it takes. That one's rarer and it usually requires you to keep the insured value updated.
The premium difference between actual cash value and replacement cost on the contents is often small, tens of dollars a year on a typical homeowners policy. People carry the cheaper version without knowing they chose it, because nobody chose it. It came that way in the quote.
Renters policies have the same fork, and the default there leans toward actual cash value more often. If you're renting, that setting is most of the value of the policy, because contents coverage is most of what you bought.
Pull the declarations page and look for the words. If it says actual cash value anywhere you didn't intend, call your agent and ask what replacement cost costs. Do it before the estimate has to be right.