Actual cash value

Actual cash value : The present-day value of property measured in cash, arrived at by taking the replacement cost and de- ducting for depreciation brought about by physical wear and tear, and obsolescence. For example, a burglary policy will insure you against loss as the result of theft of articles from your home. A burglar takes two suits, one three years old, the other a month old. Even though you paid the same price for both, wear and tear and the use you have had of the three-year old suit would make its “actual cash value” less than that of the newer suit. The fact that you may have to pay more to replace these suits with others will be taken into consideration.

The current value of property, measured in cash, calculated by taking the replacement cost and deducting depreciation due to wear and tear and obsolescence. Policies may now include options to choose between actual cash value and replacement cost coverage. New policies might offer hybrid valuation methods to provide a balance between cost and value.