What is actual cash value?

By Insuranceopedia Staff | Last updated: June 13, 2023

Actual Cash Value (ACV) is one of the ways insurers determine the insurance value of something (find out How Auto Insurance Companies Value Your Car). This is important because it affects how much the insurer will pay out in the event of a claim.

To put it simply, the Actual Cash Value of your asset is its replacement cost minus depreciation. You can read about replacement costs in other articles on this site.

Now, in actuality, there are 5 ways to calculate ACV:

1. Formula-Cost Approach: This is the classic “replacement cost minus depreciation” method. Most likely, this is the one your insurer‘s claims department will use in their calculations.

2. Market Value: This approach relies on experts to assess the value of the property before and after the loss. The disadvantage of this method is that it can be difficult to accurately assess the fair value of the property and may it not be equal to the actual loss incurred by the insured.

3. Income Method: This approach uses a net income multiplied by capitalization rate formula to calculate the “value” of the property. This approach is typically used for dilapidated, income-producing property.

4. True Value to Owner: This method is used when the insured believes that other methods fail to take into account some special circumstances (for example, an insured building might be very well maintained for its age).

5. Broad Evidence: This approach combines all of the above methods to get an approximate value.

As you can see, the exact method used to calculate ACV depends on the type of property in question as well as the actions of the insured.

If you don’t believe the value calculated by your insurance company is accurate, you might not have to settle for it. You can push for a method of calculation that would give you the highest ACV.

Share this

  • Facebook
  • LinkedIn
  • Twitter
Insuranceopedia Staff
Whether you're facing an insurance issue or just seeking helpful information, Insuranceopedia aims to be your trusted online resource for insurance-related information. With the help of insurance professionals across the country, we answer your top insurance questions in plain, accessible language.

More Q&As from our experts

Term of the Day


Insurance is a financial arrangement in which one party pays another to protect itself from a particular loss. Insurance…
Read Full Term

Stay informed with Insuranceopedia!

The world of insurance can be complicated. Subscribe to the Insuranceopedia newsletter and stay in the know! Access expert content, industry term definitions and answers to your questions from knowledgeable insurance insiders. Arm yourself with what you need to know to keep your assets and your family safe.

Go back to top