Actual Cash Value (ACV)

Actual Cash Value (ACV) is a method used by insurance companies to determine the payout for a damaged or lost item. It reflects the item's worth at the time of the loss, considering depreciation—meaning wear, age, and overall condition. Essentially, ACV equals the replacement cost minus depreciation. This approach ensures the payout covers the item's current value rather than the full original price, helping insurance fairly compensate for items that have aged or lost value over time.