Actual Cash Value

The actual cash value can be defined as the amount that is equal to the replacement cost deducting the depreciation of the asset or the property at the time of the loss while the property or asset is being damaged or stolen. The actual cash value is the actual value of the damaged or stolen property at which it can be sold at present moment. The actual cash value is always less than the amount that is required to replace or fully mend the damaged property.

There are a number of different advantages of the actual cash value as in most of the cases the actual cash value is used by the insurance companies to determine the amount that must be paid to the client or to the company whose assets or property are being damaged. This is the price paid to the property holder after the complete loss of the property or assets. The example of the actual cash value can be taken as the example of an automobile that was insured with a specific insurance company. Suppose the automobile is totaled in a road accident and now insurance company has to settle with the client. The insurance company during the settlement will pay the actual cash value of the damaged vehicle after determining the actual replacement cost of the vehicle and deducting certain factors from the actual replacement cost. The factors that are deducted from the actual replacement costs are the depreciation and the degree of wear and tear of the vehicle.


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