Actual cash value (ACV)
A claims settlement approach that pays replacement cost minus depreciation.
Plain definition
Actual cash value (ACV) settlement starts from what it would cost to replace damaged property with new property of like kind and quality, then subtracts depreciation for age, wear, and obsolescence. Policy definitions control whether depreciation is measured by age, condition, or market data.
Why it matters
ACV can leave a gap between your insurance check and what you must spend to replace items—especially for older roofs, electronics, and vehicles.
Example
A 10-year-old sofa destroyed in a fire might cost $2,000 to replace new, but after depreciation the insurer pays $700 ACV. You fund the difference unless you have replacement cost coverage where eligible.
Common misunderstanding
ACV is not “whatever the used market pays today” in every policy. Carriers follow contract definitions; two policies can calculate ACV differently.
Policy language always controls. This is educational content, not advice. See our disclaimer.