Actual cash value (ACV)
Actual cash value (ACV) is the amount an insurer pays to replace or repair a damaged item, minus a deduction for its age and wear — depreciation. It differs from replacement cost, which pays the full cost of a new equivalent.
How ACV settlements work
When a loss is settled on an ACV basis, the insurer calculates what the damaged or destroyed item was worth immediately before the loss — taking into account its age, condition, and remaining useful life. This figure is then used as the settlement, rather than the cost of buying a new equivalent.
ACV = Replacement cost new − Accumulated depreciation
ACV policies typically carry lower premiums than replacement cost policies. For items that depreciate quickly (electronics, appliances, clothing), the difference between ACV and replacement cost can be substantial. For structural elements of a building that depreciate slowly, the gap is smaller.
Also called: indemnity value. Compare with replacement cost cover — see our guide to understanding policy limits for how the basis of settlement interacts with your overall cover level.
ACV FAQ
Frequently asked questions
- Actual cash value deducts depreciation from the settlement — so a five-year-old television damaged in a fire is settled at what that used TV is worth today, not what a new equivalent costs. Replacement cost cover pays for a new equivalent without a depreciation deduction, making it the more valuable option for most contents and buildings policies. Check your declarations page to confirm which basis your policy uses.
- Insurers typically apply a depreciation schedule based on the item's category, age, and expected useful life. Electronics depreciate faster than furniture; structural components depreciate more slowly. The insurer's adjuster applies these schedules to arrive at the ACV figure. You can dispute the calculation — see our article on how to complain about your insurer if you believe the depreciation applied is excessive.