Definition
An insurance valuation that pays the depreciated value of property — replacement cost minus wear and age.
Actual cash value (ACV) pays the depreciated worth of damaged property: roughly the replacement cost minus depreciation for age and wear. A ten-year-old roof, for instance, would be reimbursed at less than a new one under ACV.
ACV settlements can leave a significant gap between the payout and the true cost to rebuild, which is why associations usually prefer replacement cost coverage for major property. Knowing which basis a policy uses avoids unpleasant surprises at claim time.