Insurance Term of the Day: Actual Cash Value

In some cases, after a loss, your insurance company will need to calculate the ACV of your property in order to pay out on your claim. Often, ACV is calculated when your vehicle or property suffers a total loss.

Essentially, actual cash value represents the amount that your property is worth, minus depreciation. To understand ACV, you must also understand depreciation.

What is depreciation?

Your car begins to lose value as soon as you drive it off the lot after purchase. Depreciation occurs with wear and tear to the vehicle, and after years of ownership. Even if your car functions perfectly, driving it causes wear and tear. Any dents, dings or accidents that your car has been in can cause the value to depreciate.

When you receive ACV on a settlement for your car, the check will be less than the cost to replace it. The insurance company is essentially paying you fair market value. The pay out you receive is going to be for the current value of your car, NOT the value of your car when you bought it.

Essentially, ACV is:

Replacement cost – depreciation = ACV
(The total amount to replace your car’s year, make, and model) – (the amount of value your car has lost over the years of owning it) = actual cash value, or the amount you will receive on a settlement.

Keep in mind that it’s possible to purchase replacement cost coverage, for newer cars, within 1 to 2 model years. Also, the coverage typically must be purchased within 30 of buying the vehicle. With this coverage, the insurer will pay out the total amount to replace your property with one that is like-new. Not every insurance company offers this specific coverage.

By: KayLynn P.


Do you have questions about your insurance? Find an insurance agent near you with our Agent Finder

Buzz Your
Insurance Agent

Search for a local agent with our agent finder map.

Agent Finder

Search All Blogs

Generic filters

Buzz Your
Insurance Agent

Search for a local agent with our agent finder map.

Agent Finder

Want to learn more about
our blog writer?

Read more about KayLynn's background.

Search All Blogs

Generic filters

Read More Insurance Blogs

Embracing Tomorrow: The Practical Power of Planning for Life’s Only Certainty

Face the future with confidence: Understand how planning for life’s only certainty with life insurance can provide lasting security.

Navigating the Grandparenting Journey: Understanding Today’s Families

Grandparenting today: Learn key shifts in family dynamics to build stronger connections with your children and grandchildren.

Finding Your Financial Foundation: Understanding the Minimum Life Insurance You Need

What’s the minimum life insurance you really need? Learn about covering final expenses, debts, and providing immediate financial relief for your family.

Declutter Your Life: Beyond the Physical to a More Streamlined Existence

Tired of clutter? Discover actionable tips to declutter not just your belongings, but also your finances and digital life for a more streamlined and stress-free life.

Your Life Insurance Journey: Start Small, Dream Big, Build Security

Don’t wait for the perfect policy. Discover how starting small with life insurance is the key to building long-term financial security for your family.

Small Steps, Big Impact: Achieving a Healthier Lifestyle Without Radical Overhaul

Forget extreme diets and intense workouts. Learn how simple, everyday choices can add up to a healthier lifestyle.

Weaving Family History: The Power and Importance of a Family Timeline

More than just dates: Crafting a family timeline to connect generations and preserve memories.

Family Fitness Adventures for Lasting Memories

Ditch the couch: Active family fun for a healthier, happier life.

Beyond Upfront Payments: Pre-Planning Your Final Arrangements with Peace of Mind

Pre-planning your farewell: Affordable options and peace of mind.

Life Insurance: Investment or Protection? Decoding Cash Value Policies

Is life insurance an investment? Understanding cash value policies.