What does ACV stand for in relation to property loss?

ACV stands for Actual Cash Value in relation to property loss. It represents the value of an insured item at the time of loss, calculated as the replacement cost minus depreciation. This means that ACV reflects what it would take to replace the damaged or lost item, accounting for wear and tear or obsolescence over time. For example, if a five-year-old roof is damaged, its ACV would consider the cost of replacing the roof today but reduced by the depreciation accrued during those five years.

Understanding ACV is crucial for both insurers and policyholders as it determines the amount of compensation that will be provided under a property policy. Therefore, knowing how ACV is calculated can help property owners make informed decisions regarding insurance coverage and claims.