Actual Cash Value (ACV)
Pays what your stuff is worth today, after depreciation — not what you paid for it.
Actual cash value, usually shortened to ACV, is one way of measuring what a loss is worth. The common shorthand is replacement price minus depreciation — what the item would cost new today, reduced for its age and wear. Some states define it as fair market value instead, and others follow a broad evidence rule that lets an adjuster weigh several factors together.
The practical result is similar either way. The settlement reflects the item as it stood the moment before the loss, not as it stood on the day it was bought. A nine-year-old sofa is settled as a nine-year-old sofa.
ACV turns up in more places than people expect. Auto physical damage is generally settled this way, so when a vehicle is a total loss the payment reflects the car's value, not its sticker price. On home policies, personal property may be ACV unless replacement cost is added, and roofs past a certain age are commonly moved to ACV settlement by endorsement in hail-prone states.
The order of the math matters. Depreciation comes off first, and the deductible comes off after that. On an older item with a high deductible, those two subtractions can leave very little — occasionally nothing.
The declarations page usually names the method, often under a heading like loss settlement. It can differ line by line inside the same policy: the structure on replacement cost, the contents on ACV, the roof on terms of its own.
In real life
A laptop bought four years ago for $1,400 is stolen out of a car. A comparable new model runs about $1,300 today, but the renters policy settles personal property at actual cash value, so the adjuster depreciates four years of use and lands at $520. The deductible is $500. The check is $20. Nothing went wrong with the claim — that is simply what ACV means in practice.
Common questions
What does actual cash value mean on an insurance policy?
It means the settlement is based on what the damaged or stolen item was worth immediately before the loss, not what it cost when new. The common calculation is today's replacement price minus depreciation for age and wear. Some states use fair market value or a broader mix of evidence instead. The deductible is then subtracted from that figure.
Why did my insurance pay less than I paid for my stuff?
If the policy settles personal property at actual cash value, the adjuster reduces today's replacement price for age and condition before applying the deductible. A five-year-old television is valued as a five-year-old television. Replacement cost coverage works differently, paying today's price for a comparable new item, but it is usually an added coverage rather than the default.
Does actual cash value apply to a totaled car?
Generally yes. When a vehicle is declared a total loss, collision and comprehensive coverage pay what the vehicle was worth just before the crash, based on comparable local sales, mileage and condition — not the purchase price and not the loan balance. When the loan balance is higher than that value, the difference is what gap coverage is designed to address.
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Definitions describe how these terms are generally used across the U.S. market. Wording, limits and exclusions vary by insurer, policy form and state — the policy you hold is what controls. See the full Insurance Glossary.