Actual Cash Value (ACV) is the amount an insurer will pay to replace damaged or lost property after subtracting depreciation for age, wear and tear, and condition. In practice ACV reimburses you for what the item was worth at the time of loss — not what it would cost to buy a brand‑new replacement.
ACV = Replacement Cost − Depreciation. Policy language typically defines ACV as the “cost to repair or replace property immediately prior to loss, less depreciation for physical deterioration, obsolescence and remaining useful life.” Exact wording and calculation method vary by insurer and policy.
ACV is the common abbreviation used in claims and policies. “Actual value” is sometimes used informally but may be ambiguous — ACV explicitly implies depreciation has been applied. When reading a policy, look for the term “Actual Cash Value (ACV)” to avoid confusion.
The basic math is straightforward: determine the cost to replace the item or component with equivalent new materials (replacement cost), estimate how much value has been lost since it was new (depreciation), subtract depreciation from replacement cost to get ACV, then subtract your deductible.
Depreciation factors typically include item age, expected useful life, observable condition, maintenance history and normal wear. Insurers often apply straight‑line depreciation: (Age ÷ Useful life) × 100 = % depreciation. Condition or obsolescence can increase depreciation beyond straight‑line amounts.
Exact tables vary by insurer — use these as illustrative ranges.
RCV pays to replace damaged property with new equivalents without deduction for depreciation. ACV pays the depreciated value. RCV applies when your policy or endorsement specifies RCV; ACV is common for personal property and basic structural coverage. RCV typically requires higher premiums.
(See glossary: replacement cost value (RCV).)
Market value is what a buyer would pay for a property in the open market and reflects location, demand and improvements. ACV is focused on the cost to replace a specific item or component less depreciation. A house’s fair market value can be higher or lower than the sum of ACV values for its parts.
“Actual value” in sales contexts sometimes refers to appraised or market value, not ACV. When discussing insurance, insist on the term ACV to avoid mixing sale‑price/market appraisals with insurance depreciation calculations.
Many insurers pay ACV initially. If the policy includes recoverable depreciation, the insurer may pay the remainder (RCV − ACV) after you repair/replace the item and submit proof (receipts, photos). Timelines to file for recoverable depreciation are policy‑specific — common windows are 180 days to 1 year.
See glossary: recoverable depreciation.
Recoverable depreciation is the portion withheld from the initial ACV payment that you can claim later once you replace or repair the damaged property. When paid, your total recovery equals the RCV (replacement cost) subject to limits and deductible.
The insurer’s adjuster or an independent appraiser typically estimates depreciation using company tables, industry guides and observable condition. Policy language defines allowed depreciation factors and dispute resolution procedures.
Homeowners with ACV coverage may face significant out‑of‑pocket costs to restore a home to pre‑loss condition. Mortgage lenders may require repairs before releasing funds and may place the lender on title until repairs are completed.
Renters’ policies commonly insure contents at ACV unless RCV coverage is purchased. Renters should track and document belongings to improve ACV outcomes.
Landlord policies may cover the building at RCV or ACV — using ACV increases landlord risk for repairs. Tenants’ belongings are typically the tenant’s responsibility and covered under renters’ policies.
Agents should note that older components may reduce insurance recoveries. Buyers must verify coverage types and consider cost to upgrade to RCV or obtain roof/HVAC endorsements when negotiating offers.
Use timestamped photos, video walkthroughs, spreadsheet inventories or inventory apps that store receipts and serial numbers in the cloud. Back up files offsite and email copies to yourself for added proof.
Public adjusters work for policyholders to negotiate higher settlements. Hire one when the claim is complex or large (losses often worth several thousand dollars or more). Fees commonly run 5–20% of the recovery; confirm fee structure and licensing first.
Consult an attorney if you suspect bad faith, wrongful denial, or if negotiation and appraisal fail. File a complaint with the state insurance department if you believe the insurer is violating state rules or taking unreasonable positions.
Some states require insurers to pay recoverable depreciation within a set period after proof of repair; others regulate appraisal and claim handling timelines. State law can also affect allowable depreciation methods and consumer protections.
Visit your state insurance commissioner’s website for complaint procedures, consumer guides and state‑specific deadlines or rules. Search “[Your State] Insurance Department” or contact the regulator for answers about state law and insurer obligations.
ACV is frequently confused with RCV or market value. Remember: ACV = replacement cost minus depreciation; market/appraised values are separate concepts.
Useful life varies by item and insurer; electronics depreciate faster than structural components, and personal property tables differ across companies.
Many policyholders miss endorsements that convert ACV coverage to RCV or add scheduled coverage for valuable items; review limits and endorsements carefully.
Inputs: estimated replacement cost, item age, estimated useful life, deductible. Calculation: Depreciation% = Age ÷ Useful life. ACV = Replacement Cost × (1 − Depreciation%) − Deductible.
Use retailer prices, contractor estimates and manufacturer specs for replacement cost. Useful life tables are available from insurers, consumer guides and industry standards; ask your agent which tables they use.
Keep a claim checklist: date of loss, photos, inventory, receipts, adjuster name and claim number, contractor estimates and all correspondence. For state rules, consult your state insurance department.
TV replacement cost (new): $1,200. Age: 4 years. Useful life: 8 years. Depreciation = 4/8 = 50%. ACV before deductible = $1,200 × (1 − 0.50) = $600. If deductible = $500, payment = $100.
Roof replacement cost: $10,000. Age: 10 years. Useful life: 25 years. Depreciation = 10/25 = 40%. ACV before deductible = $10,000 × (1 − 0.40) = $6,000. After $1,000 deductible → $5,000. If policy includes recoverable depreciation, you may submit receipts after replacement to collect the additional $4,000.
Storm damages siding and an 8‑year‑old HVAC. Homeowner files claim, adjuster inspects and issues ACV payment for each item based on replacement cost and depreciation. Homeowner uses ACV to make temporary repairs, hires contractor for permanent repairs, submits receipts and collects recoverable depreciation for the HVAC three months later.
The insurer used a 15‑year useful life for HVAC and applied 53% depreciation. The homeowner submitted maintenance records showing recent parts replacement and an energy‑efficient upgrade; insurer reduced depreciation and increased final recoverable depreciation payout.
No. ACV reflects depreciated replacement cost of items/components; market value reflects what a buyer would pay for the property as a whole.
Possibly. If your policy includes recoverable depreciation or RCV endorsement, you can recover the difference after completing repairs and submitting proof.
ACV payments don’t typically affect title, but lenders may require insurance proceeds be used for repairs and sometimes require joint checks or lienholder notifications. Check your mortgage clause.
Deadlines vary by policy and state law. Start the dispute promptly — submit evidence, follow the insurer’s appeal steps, and contact your state insurance department if necessary.
Consider upgrading to RCV or guaranteed replacement cost if you want full replacement protection and can afford higher premiums. Hire a public adjuster for large, complex claims or consult an attorney if you face denials, bad‑faith handling or unresolvable disputes.
