Actual Cash Value (ACV)
The amount an insurer pays for a covered loss when a policy doesn't provide full replacement cost coverage, calculated as the cost to replace the damaged item with a new one, minus depreciation for its age and condition at the time of loss.
Why it matters
ACV and replacement cost coverage can produce very different payouts for the exact same damage, so knowing which type of coverage a policy actually provides matters as much as the scope of loss itself: an ACV payout on an older roof can fall far short of what it actually costs to replace it.
On a real project
A 15-year-old roof damaged in a storm is valued at its full replacement cost, then depreciated based on its age and expected lifespan, and the resulting lower number, not the cost of a brand-new roof, is what the insurer pays under an ACV policy.
Who this matters most to
An Insurance Adjuster calculates the ACV payout using standardized depreciation schedules tied to an item's age and expected life. A Public Adjuster reviews that depreciation closely on behalf of the policyholder, since an ACV policy still requires getting the depreciation calculation right rather than just accepting the insurer's first number.
Where this goes wrong
A homeowner with an ACV policy assumes their payout will cover a brand-new roof replacement, not realizing their policy type deducts depreciation. The actual check comes in well below the contractor's replacement estimate, and the gap isn't discovered until the homeowner is already comparing quotes to the amount received.