Glossary

Actual cash value

A property valuation basis that pays the cost to replace damaged property minus depreciation for age and wear, not the price of a brand-new item.

Also called: ACV, ACV valuation, actual cash value coverage

Actual cash value (ACV) is the default valuation in the ISO commercial property forms unless the policy adds replacement cost. The common formula is replacement cost new minus depreciation. The insurer pays for the property as it stood just before the loss, worn and aged, rather than for a new equivalent. A few states define ACV differently, as fair market value or under a "broad evidence" rule, so the same loss can settle differently from one state to the next.

Say a restaurant's nine-year-old walk-in cooler would cost $18,000 to replace and the adjuster applies 50% depreciation. An ACV settlement is $9,000 before the deductible, and the owner funds the rest of the new unit. Under replacement cost valuation the same claim pays close to the full $18,000, usually once the unit is actually replaced.

Roofs, HVAC units and equipment lose the most under ACV, and many carriers attach roof payment schedules to older roofs. Ask which valuation applies to each class of property, and whether the coinsurance test uses ACV too. The guide on replacement cost vs actual cash value walks through the trade-off.

Last reviewed October 10, 2026

In the index now

Related terms

Replacement cost A valuation basis that pays the cost to repair or replace damaged property with like kind and quality, without deducting for depreciation. Coinsurance A property policy condition requiring you to insure to a set percentage of value, or share the loss. (Health plans use the word for a cost share.) Agreed value A property policy option where insurer and insured agree on the covered value in advance, which suspends the coinsurance penalty for the agreed period. Insurance to value Carrying a property limit that matches the full value of what you insure, so a loss is paid in full and no coinsurance penalty applies. Deductible The amount of a covered loss the policyholder bears before the insurer pays, set in the policy and subtracted from the loss.

Related guides

The appraisal clause in commercial property disputes How the appraisal clause settles disagreements over the amount of a property or income loss, what it cannot decide, and Texas and Florida rulings on causation. Bailee coverage: insuring customers' property in your care Bailee's customers coverage pays for customers' property held for service or repair. Legal liability vs direct forms, the processing exclusion, valuation, gaps. A commercial truck accident claim, step by step, from the scene to renewal A hypothetical composite walkthrough of a trucking accident claim: scene, notice, MCS-90, liability, physical damage, cargo, excess limits, subrogation and CSA. Commercial flood insurance: NFIP limits and private options Commercial property policies exclude flood. How NFIP coverage works for businesses, its $500,000 limits and gaps, lender rules, and what private flood adds. The commercial property claim process, step by step How a commercial property claim moves from first notice to final payment: inspection, scope and estimate, proof of loss, ACV and replacement cost payments. Commercial property insurance: what it covers and what it doesn't How the standard ISO commercial property policy works: covered property, causes of loss, built-in extensions and limits, valuation, and the gaps to close.

Related industries

Farm and ranch insurance Farm policies versus commercial coverage, crop insurance, equipment and livestock, workers' comp exemptions by state, H-2A rules and agritourism statutes.

Related tools

Coinsurance penalty calculator See what a commercial property policy pays when your limit falls short of the coinsurance requirement, how big the penalty is and the limit that avoids it.

Related en español

Seguro de equipo de contratistas: herramientas, maquinaria y equipo rentado El seguro de equipo de contratistas es una póliza flotante de transporte terrestre para herramientas y maquinaria fuera del taller: cobertura, valuación y robo. Seguro de propiedad comercial: qué cubre y qué no Cómo funciona la póliza ISO estándar de propiedad comercial: bienes cubiertos, causas de pérdida, extensiones y sus límites, valuación y los huecos por cerrar.