10. What is ACV Value?

“ACV” is an acronym for the term Actual Cash Value. As the term suggests the “Actual Cash Value” is the price of a vehicle that one could buy for cash at a specific time-frame. ACV is often computed by determining its “Replacement Cost” (RC) or the cash price required to buy an identical item and then adding for enhancements and/or by subtracting for depreciation based on age and condition of the property to be replaced to render a fair and accurate value for settlement purposes. One example may be; the cost of new plus or minus appropriate adjustments.
In the property and casualty insurance industry, “Actual Cash Value” or ACV is a term for the method of valuing insured property by determining the cost of repairing or replacing damaged property with other of like kind and quality (LKQ) and in the same physical condition; replacement cost less physical depreciation based on age, condition, time in use and obsolescence. Depreciation is based on age and condition.

Example: Let’s say you bought a new television five years ago for $600. Could you sell it for the same $600 today?  Of course not, it may be worth only $150.00.  If your television was stolen or damaged, that $150 is all you would get from the insurance company with an actual cash value (ACV) policy.


Category: Appraisals FAQ

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