What is the definition of Actual Cash Value?

The Actual Cash Value is the amount that approximates the cost to replace an item that has been lost or damaged after the cost of obsolescence and accumulated depreciation are subtracted. The actual cash value is computed when someone is being reimbursed for a loss.

For example, a fire destroys John's house, which is insured. The insurance company will compute for the amount needed to pay for the items in the home, say a television. To compute, the insurance company will first determine the current value of a television of the same kind. Then, it will subtract other factors such as how long John has owned the television, as well as wear and tear on the television.

For insurance policies, this is the amount that the policy owner will receive when a life insurance policy is surrendered.

• Premium
• Pollution Insurance
• Personal Injury Protection Coverage (PIP)
• Prime Rate
• Catastrophe Reinsurance