THE FALLS INSURANCE CENTER, INC.
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Replacement cost vs. actual cash value
Replacement cost is the amount it would take to replace your vehicle or
repair damages with materials of similar kind and quality, without
deducting for depreciation. Depreciation is the decrease in vehicle value
because of age or wear and tear.
Actual cash value (ACV) is the value of your property when it is damaged or destroyed. Claims adjusters usually figure ACV by taking the replacement cost and subtracting depreciation. For example, an auto that costs $5,000 may have a reasonable "life" of 5 years. If it is destroyed after 10 years, its actual cash value will be substantially less then $5,000 because of depreciation.