Insurance Terms: Actual Cash Value
Actual Cash Value:
Actual Cash Value or ACV is repayment value for indemnification due to loss or damage of property; in most cases it is replacement cost minus depreciation
Principle of Indemnity:
A general legal principle related to insurance that holds that the individual recovering under an insurance policy should be restored to the approximate financial position he or she was in prior to the loss. Legal principle limiting compensation for damages be equivalent to the losses incurred.
Example: 5 years ago you bought a brand new car for $40,000. You drive it for 5 years, adding miles and wear & tear. Then, suddenly its totaled and the loss is covered under your policy. Your coverage will pay for the car you have now with age and usage depreciated, but not the brand new car you purchased 5 years ago.
Whenever applicable we recommend Replacement Cost vs. ACV.
Credit: National Association of Insurance Commissioners for the use of definitions above.
To explore insurance options for you and your family, call Haymaker Insurance in Federal Way, WA. We can be reached at 253-220-5430.