Actual Cash Value vs Replacement Cost

Two ways most insurance policies value property…

Replacement cost is the cost to buy the item lost new.  Its the cost to rebuild the building with current cost of materials and the current cost of labor.

Actual cash value (ACV) is usually defined as replacement cost minus depreciation.  It also can be thought of as the market value of an item.

The replacement cost of a 4 year old TV may be $1,500 while the actual cash value may be only $100.