Actual Cash Value
Plain-English definition and practical context.
Definition: Actual Cash Value | (ACV)
pronunciation: ak-chu-uhl kash val-yoo
Actual Cash Value (ACV) is an insurance valuation method that determines the value of damaged or destroyed property at the time of loss by taking the replacement cost of the item and subtracting physical depreciation due to age, wear, and condition.
Under flood insurance policies, ACV coverage means that payment reflects the item’s current value rather than the cost to purchase a brand-new replacement. This approach is commonly applied to certain building components and personal property, depending on policy terms. FEMA: Flood Insurance Claims Process
Depreciation accounts for factors such as age, normal use, and obsolescence. As a result, an ACV settlement is typically lower than a Replacement Cost Value (RCV) settlement, which does not subtract depreciation. NFIP Summary of Coverage