What Is Actual Cash Value?

Understand how Actual Cash Value affects claim payments and why depreciation matters.

Understanding Actual Cash Value

Actual Cash Value (ACV) is a way insurance companies determine how much to pay for damaged property after a covered loss.

In simple terms, ACV usually means the cost to replace the damaged item minus depreciation. Depreciation is the decrease in value due to age, wear and tear, condition, or normal use.

Simple Example: If replacing damaged property costs $10,000, but the insurance company applies $3,000 in depreciation, the Actual Cash Value would be $7,000. Your deductible may also apply.

Actual Cash Value coverage can sometimes lower your premium, but it may also result in a lower claim payout after a loss.