ACV is defined as replacement cost minus depreciation.

• A. Replacement cost minus depreciation
• B. Market value at the time of loss
• C. Replacement cost
• D. Insured value at purchase

Answer: (A)

Actual Cash Value shows what you’d recover after accounting for wear and age. It’s calculated by taking the replacement cost of the item today and subtracting depreciation for age, wear, and obsolescence. This means you’re receiving the value reflecting the item’s current worth, not its full new price.

For example, replacing a damaged item today might cost $10,000, but if the item is several years old and has depreciation of $2,000, the ACV would be $8,000. The other concepts aren’t what ACV represents: market value at the time of loss can be higher or lower depending on demand and other factors; replacement cost is the full amount to replace with new, without subtracting depreciation; and insured value at purchase is the limit or amount originally insured, not the depreciated value at loss.