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Actual Cash Value

Calculate the actual cash value of insured property from replacement cost, expected life, and current age.

Property details

$
years
years

Actual cash value

$1,750.00

50.0% depreciated

Value breakdown

$3,500.00
  • Actual cash value$1,750.0050.0%
  • Depreciation$1,750.0050.0%

How actual cash value is calculated

Insurers often estimate ACV as today's replacement cost times remaining useful life. This is not the same as accounting book value from original purchase price.

  1. Remaining useful life

    Remaining life=n−t\text{Remaining life} = n - t

    Subtract age of 5 years from a 10-year useful life. Remaining life is 5 years.

  2. Remaining-life percentage

    Remaining %=n−tn\text{Remaining \%} = \frac{n - t}{n}

    Divide remaining life by useful life. 5 / 10 is 50.0%.

  3. Actual cash value

    ACV=Replacement cost×n−tn\text{ACV} = \text{Replacement cost} \times \frac{n - t}{n}

    Multiply replacement cost of $3,500.00 by the remaining-life share. Actual cash value is $1,750.00. Depreciation is $1,750.00.

This calculator uses straight-line remaining life against today's replacement cost. Some policies and states use fair market value or a broad-evidence rule instead. A claim payout may also subtract your deductible, which is not modeled here.
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What is actual cash value?

Actual cash value (ACV) is a property-and-casualty insurance valuation method. It is the amount an insurer typically uses when a policy pays the current worth of damaged or stolen property rather than the full cost of a brand-new replacement. FEMA's Standard Flood Insurance Policy defines ACV as the cost to replace an insured item at the time of loss, less physical depreciation. All math in this calculator runs in your browser.

ACV is not the same as accounting book value. Book value starts from historical purchase price and subtracts accumulated depreciation for the financial statements. If you need that ledger figure, use the accumulated depreciation calculator. Insurance ACV starts from what a similar new item costs today.

Replacement cost minus depreciation

The most common ACV formula is replacement cost minus depreciation. Depreciation here is usually a remaining-life percentage: how much of the item's expected useful life is left. Wikipedia and Investopedia both work a television that is halfway through a 10-year life.

ACV=Replacement cost×n−tn\text{ACV} = \text{Replacement cost} \times \frac{n - t}{n}

n is expected useful life in years and t is the item's age at the time of loss. Equivalent forms are replacement cost times remaining-life percentage, or replacement cost minus straight-line depreciation.

Depreciation=Replacement cost−ACV\text{Depreciation} = \text{Replacement cost} - \text{ACV}

Worked example

Investopedia's example: a television bought years ago is destroyed. A similar set costs $3,500 today, televisions are assumed to last 10 years, and the lost set is 5 years old. Half of its life remains, so ACV is $3,500 × 50% = $1,750. Depreciation is $1,750. Wikipedia uses the same remaining-life method with a $2,500 replacement cost and also arrives at 50% remaining, or $1,250.

Enter today's replacement cost, not the original purchase price, unless those two amounts happen to be the same. After you know ACV, a claim check may still subtract a deductible.

Other valuation methods

Replacement cost coverage pays to replace the item with one of like kind and quality without subtracting depreciation, which is why those policies usually cost more. Some states and policies instead use fair market value (what the used item would have sold for) or a broad-evidence rule that weighs several factors. This tool models the remaining-life replacement-cost method only.

Frequently asked questions

How is actual cash value calculated?
This calculator multiplies today's replacement cost by remaining useful life divided by expected life. That is replacement cost minus straight-line depreciation. Equivalent to Investopedia's 50% remaining-life television example of $1,750 on a $3,500 replacement cost.
Should I enter purchase price or replacement cost?
Enter what a similar new item costs today. Original purchase price is the starting point for accounting book value, not for insurance ACV.
Is ACV the same as book value?
No. Book value is historical cost minus accumulated depreciation. ACV uses current replacement cost and remaining useful life.
Does this include my insurance deductible?
No. Many policies pay ACV minus the deductible. Subtract that amount from the result if you are estimating a claim check.
What if the item is older than its useful life?
Remaining life is floored at zero, so actual cash value is $0. Some policies still pay a small residual; this remaining-life model does not add a salvage floor.
Are the results stored?
No. All math runs in your browser. Changing the fields updates the page URL so you can copy and share your inputs.

Resources and references

The formulas and methods in this calculator were checked against these independent sources.