In auto insurance, what does "actual cash value" (ACV) refer to?

Actual Cash Value (ACV) is a method of valuing property that takes into account the replacement cost of a vehicle minus depreciation. This approach reflects the vehicle's current market value, considering factors such as age, wear and tear, and overall condition at the time of a loss.

In the context of auto insurance, if a vehicle is damaged or totaled, the insurance company will typically reimburse the policyholder based on the ACV, which recognizes that the vehicle is not worth the same amount it was when it was new due to depreciation. This method provides a fair assessment of the vehicle's value for claims purposes, ensuring that policyholders receive a compensation amount that reflects what the vehicle is worth just before the incident, rather than the cost to replace it with a brand-new model or the price originally paid for it.