Actual Cash Value

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DEFINITION of 'Actual Cash Value'

The amount equal to the replacement cost minus depreciation of a damaged or stolen property at the time of the loss. It is the actual value for which the property could be sold, which is always less than what it would cost to replace it.

BREAKING DOWN 'Actual Cash Value'

Sometimes, insurance companies use actual cash value to determine the amount to be paid to a policyholder after loss or damage to the insured property. In the case of an automobile that is totaled in an accident, for example, the insurance company would typically pay the actual cash value of the vehicle after determining its replacement cost and subtracting factors such as depreciation and wear and tear. Under replacement-cost coverage, the insurer would pay the amount required to replace the covered item with a like-kind new one.

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