Actual Cash Value (ACV)
Definition
The replacement cost of damaged or stolen property minus depreciation. ACV is calculated by determining what it would cost to replace the item today, then subtracting for age, wear, and condition. Many standard policies settle claims on an ACV basis unless you have a replacement cost endorsement.
When This Matters
Your 10-year-old roof is damaged in a storm. Replacement cost is $15,000, but the insurer depreciates it by 40% for age and wear, paying you $9,000 on an ACV basis.
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