What this calculator does
Actual cash value is replacement cost less depreciation. It is what an insurer pays under an ACV policy, and it is almost always less than what replacing the item would actually cost you.
The gap grows quickly. A $25,000 item with a twelve year life is worth $16,666.67 after four years and $8,333.33 after eight, so a claim in year eight leaves two thirds of the replacement cost to find yourself.
The formula
The remaining share of the item's useful life is its age subtracted from its expected life, divided by that expected life. Multiplying the replacement price by that share gives the actual cash value.
| Term | Meaning |
|---|---|
| Actual cash value | Replacement cost reduced for age and wear. |
| Replacement cost | What it would take to buy the same item new today. |
| Useful life | How long the item is expected to last, which sets the depreciation rate. |
The inputs explained
| Field | What to enter |
|---|---|
| Purchase / replacement price ($) | The purchase or current replacement price of the item. |
| Expected useful life (years) | The expected useful life in years. Insurers publish schedules by item type. |
| Current age of the item (years) | How old the item is now, in years. |
When to use it
Estimating a claim settlement
An ACV policy pays this figure, not what a replacement would cost.
Deciding between ACV and replacement cover
The gap between the two figures is what the higher premium buys.
Valuing a used asset
Straight-line depreciation gives a defensible figure for a private sale or a schedule.
Worked examples
Every figure in the tables below is produced by this page’s own calculator at build time, so the numbers and the tool always agree. Select any row to load that scenario.
How fast does the settlement figure fall?
The same item at four points in its life.
| Age of the item | Actual cash value | Total depreciation so far |
|---|---|---|
| New | $25,000.00 | $0.00 |
| 4 years | $16,666.67 | $8,333.33 |
| 8 years | $8,333.33 | $16,666.67 |
| 12 years | $0.00 | $25,000.00 |
Questions
Why is an ACV settlement so much lower than replacement cost?
Because it pays for what you lost, not for a new item. Insurers reason that a new replacement would leave you better off than before the loss, so they deduct for the age and wear the item had already accumulated.
Should I pay more for replacement cost cover?
That depends on how much of the gap you could absorb. On an older item the ACV settlement can be a small fraction of what a replacement costs, which is exactly when the extra premium earns its keep. Your insurer or broker can advise on your specific policy.
Is depreciation always straight-line?
Not necessarily. Many insurers use published schedules that vary by item category and may not be linear, and some apply a floor so the settlement never reaches zero. This gives the standard straight-line estimate.
Does condition matter?
It can. An adjuster may vary the effective age of an item that is unusually well or badly maintained, which shifts the settlement. Age alone is the starting point rather than the final word.
For depreciation in an accounting context, see the depreciation calculator. For insurer profitability, see the insurance combined ratio calculator.