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

Search
Generic filters
Exact matches only
Search in title
Search in content
Search in excerpt

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

Search
Generic filters
Exact matches only
Search in title
Search in content
Search in excerpt

The Power of Looking Forward

What’s on Your Calendar you are Looking Ahead to?

Reachable, Achievable Goals

Keep Your Life Moving Forward with Smaller Goals

The Three Ironies of Life Insurance

There are Various Excuses for Not Having Life Insurance

6 Things You Can Do (or Stop Doing) Today to Extend Your Life

They Are All Simple But They May Not Be Easy

Choices

Every Day We Are Impacted by the Large and Small Choices We Make

The Letter

What Would You Like Your Letter to Convey?

Using Your Smartphone to Enhance Your Life

Get More From Your Smartphone with These Life Enhancing Ideas

Life’s Important Numbers

Not Including Your IQ, These Numbers Could Impact Your Life Most

Your Life Insurance Application Can Be Your Guide to Living Longer

The Keys to a Longer Life May Be Right In Front of Our Eyes

The Price of Your Morning Cup of Coffee

Do You Need to Give up That Morning Treat to Afford Life insurance?