What is Actual Cash Value?
Actual cash value (ACV) is the amount of cash that would be received if the property were sold at the time of loss. It is an insurance industry term for the replacement cost of property minus any depreciation.
How to calculate actual cash value?
To calculate the actual cash value of an item, you will need to know the replacement cost, depreciation, and age of the item. The replacement cost is what it would cost to replace the item new. The depreciation is how much the item has decreased in value since it was bought. To calculate the actual cash value, just subtract the depreciation from the replacement cost.
Difference between Actual Cash Value and Replacement Cost
Actual cash value (ACV) and replacement cost are two ways to measure an item's value for insurance purposes. ACV is the amount of money that it would cost to replace the same item with a like-kind and quality item at the current market price, minus any depreciation due to age or wear and tear.
Whereas, replacement Cost is the amount of money that it would cost to replace a damaged, lost, or stolen property with one of like kind and quality without deducting any depreciation.