Define Insurance – What does Actual Cash Value (ACV) Mean?

We have been covering all the different valuation terms used in insurance over the last week. The last major valuation term is “Actual Cash Value?” Let’s take a look at what does actual cash value mean and let’s apply it to our running claims scenario.

First, we once again look at the actual insurance definition:

Under the Actual Cash Value method, the loss will be valued at cost of the item in today’s dollar amount, including depreciation, had the item been in proper working condition.

To put this in what we have always called “plain English,” replacement cost will simply replace your item with the cash value or the same aged item. If you take my broken laptop back in our What Does Agreed Value Mean article, the MacBook that I paid 1,300 dollars for was worth 800 dollars today, assuming it wasn’t broken. With ACV, I would simply be paid the 800 dollars and sent about my way. I would have to supplement this amount with my own money in order to buy a new laptop or I could be a used laptop similar to what I previously owned.

We hope this clears up any confusion with the other valuation methods we covered such as Agreed Value and Replacement Cost.

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