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

Do You Still Need Life Insurance After Age 65?

How Life Insurance Can Help into Retirement

Why Life Insurance Is Such a Good Bet

A Practical Way to Protect Your Family

Why Permanent Life Insurance Is Still Popular

Is Permanent Life Insurance the Best Choice for You?

Why Everyone Should at Least Have a Small Life Insurance Policy

Even a Smaller Life Policy Can Be Meaningful

Life Insurance 101: What Everyone Should Know

Here are the Basics You Should Knowledgeable

Buying Life Insurance When You Have the Most Options

When Is the Best Time to Buy Life Insurance

Unique Situations That Call For a Life Insurance Quote from an Independent Agent

Your Lifestyle May Impact Your Ability to Get Life Insurance

Why Term Insurance Is So Popular

More Families Are Turning to Term Insurance For Good Reasons. Here’s Why.

Setting a Life Insurance Goal

You May Have Goals For Savings and Investments. What About Life Insurance?

Should You Have Life Insurance? HINT: Ask Your Spouse

Odds Are Your Spouse Would Want You to Have More Life Insurance Coverage