What does ACV and Depreciation mean?
[A: Actual Cash Value (ACV) is the cost of replacing or restoring property at prices prevailing at the time and place of the loss, less depreciation, however caused. For example, if an item is worth $100 new, is expected to last for 5 years and you have owned the item for 2 1/2 years, then the ACV of that item could be established as 50% of its original value. The amount subtracted from the replacement cost value based upon the percentage of the ACV is typically referred to as Depreciation. Depreciation is a decrease in the value of property over a period of time due to wear and tear or obsolescence. Depreciation is used to determine the Actual Cash Value of property at the time of the loss. Under most cases the ACV is refunded after the job is completed with an invoice presented to the insurance company from your contractor.
