Question

Which of the following best describes Actual Cash Value (ACV)?

a. Replacement cost less depreciation.
b. Stated value.
c. Cost of repair or replace.
d. Market value less depreciation.

Answer 1

Actual Cash Value (ACV) is defined as the replacement cost of an item minus depreciation, reflecting the current value of a similar new item reduced by wear and tear or obsolescence.

Step-by-step explanation:

The term Actual Cash Value (ACV) best describes a. Replacement cost less depreciation. ACV is an insurance term that represents the amount equal to the replacement cost of an item, minus depreciation. For instance, if you have a 5-year-old laptop that is damaged or stolen, the insurance company will estimate the current cost to buy a new laptop of the same kind and then subtract the amount of value that the laptop has lost over the 5 years due to wear and tear, technological advancements, and other factors. This figure is the ACV, which is what you would receive from the insurance claim.