In property insurance, what is actual cash value?

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

Answer: (A)

Actual cash value reflects the current value of the property after accounting for depreciation. It’s the replacement cost at the time of loss minus depreciation, meaning you’re reimbursed for what the item is worth today given wear and age, not for what you originally paid or for a brand-new replacement. For example, if replacing an item now would cost $1,300 but it’s been worn out and aged, with 50% depreciation, the ACV would be $650. This differs from replacement cost, which would pay $1,300 without subtracting depreciation, and from market value or original cost, which don’t align with the current replacement price after wear.