Actual Cash Value (ACV)
A claim payout method that subtracts depreciation — usually pays less than replacement cost.
Actual Cash Value (ACV) is a claims valuation method that pays you the depreciated value of damaged property — what it's worth today, not what it would cost to replace. The carrier estimates the property's age, useful life, and condition, then deducts depreciation accordingly.
ACV is the default for personal property on most basic homeowners policies and for older roofs in many Midwest states (where carriers have adopted "ACV roof" endorsements due to hail loss frequency). Cars over a certain age also typically pay out at ACV under collision/comprehensive — the maximum the carrier owes is what your specific car would sell for in today's market.
The downside of ACV is obvious: your 12-year-old asphalt shingle roof might cost $22,000 to replace, but the carrier might pay only $4,000-$8,000 under ACV. Many homeowners are shocked at claim time to learn their policy is ACV when they assumed replacement cost.
If you're shopping homeowners insurance in IL/IN/WI, specifically ask whether your roof coverage is ACV or Replacement Cost. The premium difference is small (usually $100-$200/year), but the claim difference can be tens of thousands.
Related terms:Replacement Cost·Deductible
Related Geneva services:Home Insurance