VELARIS
Sign In
Glossary

Actual cash value (ACV)

Actual cash value is the replacement cost of damaged property minus depreciation. If a five-year-old couch is destroyed, ACV pays what a five-year-old couch is worth today, not what a new one costs.

By Andrew Bate, Co-founderReviewed by Stuart BateUpdated

Why this matters for property managers

Owner disputes after damage often trace back to this term. An owner expects a new couch; an ACV policy pays for a used one. Managers should know which basis their damage program and their owners' policies use, and put it in the management agreement so the conversation happens before a claim rather than after.

ACV vs. replacement cost in a vacation rental damage claim

Most guest-damage disputes with owners come down to this term. If a guest ruins a five-year-old sofa, an actual cash value settlement pays what that sofa was worth the day before, not what a new one costs, and the owner sees the gap as the manager's problem. Check whether your damage program and the owner's own property policy settle on ACV or replacement cost, put the answer in the management agreement, and set the guest damage fee with replacement in mind. A program that pays replacement cost on contents removes the argument entirely.

Related terms

Replacement cost
Replacement cost is the amount needed to replace damaged property with a new item of similar kind and quality, without deducting depreciation. It pays more than actual cash value and usually carries a higher premium.
Indemnity
Indemnity is the principle of restoring the insured to the financial position they held before a loss. Insurance makes the policyholder whole; it does not make them better off, which is why a $200,000 property cannot be insured for $500,000.
Deductible
A deductible is the amount the policyholder pays out of pocket on a claim before insurance pays. A $1,000 deductible on a $5,000 claim means the insured pays $1,000 and the insurer $4,000. Higher deductibles generally mean lower premiums.

Browse every term in the insurance glossary for property managers.

Actual cash value (ACV): common questions

Is ACV or replacement cost better for vacation rental contents?

Replacement cost pays more per claim but costs more in premium. For furnished rentals with frequent contents claims, replacement cost usually produces fewer owner disputes.

How is depreciation calculated?

Insurers apply a depreciation schedule based on the item's expected useful life and age. A three-year-old item with a ten-year life is typically depreciated by about 30%.

Related guides

Property damage coverage
Read the full Velaris guide.
Vacation rental damage waiver program
Read the full Velaris guide.

Want this explained for your portfolio?

Our team speaks plain English and knows property management. Ask us how this applies to the homes you manage.

Get a Quote