Actual Cash Value

Actual Cash Value is an important part of many insurance policies, as it is used to determine the amount of money the policyholder will receive if they make a claim. In general, Actual Cash Value is the cost of replacing an item or property, minus any depreciation that has occurred since it was originally purchased or acquired.

Example

For example, if a policyholder has a two-year-old car that is destroyed in an accident, the Actual Cash Value could be determined by subtracting the depreciation value of the car from the current replacement cost of a similar car. This amount would be the Actual Cash Value for the policyholder's car and the insurance company would then pay out the Actual Cash Value minus any applicable deductibles.