Actual Cash Value (ACV)
A settlement basis that pays replacement cost minus depreciation, so an older home pays out much less than the cost of a new one.
Also called: ACV, Actual cash value
Actual cash value, or ACV, is a way of settling a claim that pays what your damaged property was worth on the day of the loss. It is the cost to replace it minus depreciation for age and wear.
For example, suppose a roof would cost $10,000 to replace and is considered 60% depreciated. An ACV settlement would pay about $4,000, less your deductible. The same claim on replacement cost coverage would pay the full amount needed to rebuild it, with no depreciation deducted. (The numbers here are only an illustration.)
Older manufactured homes are often offered ACV coverage only, and some carriers apply ACV to certain parts such as the roof even when the rest of the home is on replacement cost. ACV policies usually cost less, but the payout can fall well short of what repairs actually cost.
Common questions
Is ACV or replacement cost better?
Replacement cost pays more after a loss but costs more and is not always available for older homes. ACV is cheaper but leaves you to cover the depreciation.
Why was I offered ACV instead of replacement cost?
Usually because of the home's age or condition. Many carriers limit replacement cost to newer homes.
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