Helpful Small Business Insurance Terms and Definitions
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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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