The Actual Cash Value (ACV) is best described as:

• A. The purchased value of a property
• B. The policy limit
• C. The replacement cost minus depreciation
• D. The current market value

Answer: (C)

Actual Cash Value represents the item’s current value after depreciation. It is calculated as the replacement cost to buy a similar item today minus depreciation for age, wear, and obsolescence. This means you’re not getting the original purchase price, and you’re not getting the item’s current market value, nor the policy’s maximum payout—the ACV is the amount the insurer typically pays under an ACV provision. If you have replacement-cost coverage, you could receive enough to replace the item new, instead of its depreciated value. For example, a five-year-old device might have a replacement cost of $1,000 but $400 of depreciation, making the ACV $600.