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

Life Insurance Is Not About You

There are Many Good Reasons to Get Life Insurance. You May Not Be One of Them.

Four Needs Life Insurance Can Help Fulfill

Life Insurance May Be More Versatile Than You Think

Term Insurance: Big Protection at Affordable Rates

If You Are Entering a High Responsibility Portion of Life, Term Insurance May be the Answer

Funerals, Life Insurance and Flowers

How Funerals Have Changed in Recent Years

The Difference Between Burial Insurance and Life Insurance

Do You Have Sufficient Life Insurance for Your Situation?

Why a Million Dollar Life Insurance Policy May Not Be Enough

The Time When a Million Dollars in Life Insurance May Have Seemed a Bit Much

Creating a Life Insurance Inventory

What Do You Want Your Life Insurance Proceeds to Accomplish?

Life Insurance: Why Waiting Limits Your Options

Waiting to purchase life insurance just may limit your options. Here’s how to maximize your choices when buying life insurance.

Five Cents a Week for Life Insurance? Wait…There’s more!

There Was a Life Insurance Version of the Milk Man and Home Doctor Visit

The Difference Between Term Life Insurance and Permanent Life Insurance Explained

This is a Great Way to Start with Life Insurance

Leave a Comment