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Actual Cash Value (ACV)

The current value of an insured piece of property.

Simply speaking, the ACV is the value of an item after its depreciation has been subtracted from the current-market cost of a similar item. Insurance providers calculate the item's depreciation by determining first the item's "useful life" and then how much "useful life" the object has left.

Let's say your two-year-old laptop is stolen and you have an actual-cash value Property Insurance policy. Two years ago, the laptop cost $2,000, but today a similar laptop costs $2,500. Your insurance provider determines that the useful life of a laptop is seven years, which means the stolen laptop had about 71 percent of its useful life left. The ACV equals $2,500 (the replacement cost) times 71 percent, or $1,775.

Insurance providers distinguish ACV from replacement value, which is the cost to replace an insured item at the current-market price of a similar item.

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