Actual Cash Value (ACV)

The ACV or Actual Cash Value of a given item is a calculation of the value of an item in ‘actual’ dollars. The National Association of Insurance Commissioners (NAIC) defines Actual Cash Value as “repayment value for indemnification due to loss or damage of property; in most cases it is replacement cost minus depreciation.” For example, a couch that is five years old generally has more wear and tear on it than a brand new couch, and the ACV valuation takes factors such as those into account. Put another way, the Actual Cash Value represents the value of property at the time of the loss, in contrast to the Replacement Cost Value (RCV), which represents the ‘off the shelf’ cost of a new replacement.