Many of you may be trying to figure out what the question even means. I know adjusters who are still trying to figure it out.
Let me explain: Suppose you have a fire. Your personal property is burned. What does the insurance compay pay?
Actual cash value is what the item is worth in its used condition. It can be calculated by figuring out what the item sells for used. For example, your new computer cost $1,000. One year later, you can sell it for $400. Then, the actual cash value is $400.
Do not allow the adjuster to tell you that he will take a flat percentage of depreciation. Depreciation is an easy way for the adjuster to try to settle your case. Each item will be in its own condition and will be worth an amount based on that condition. You are entitled to the actual cash value, not replacement cost less depreciation.
Replacement cost is the amount it costs to actually replace the item. Your computer that you bought one year ago for $1,000 can probably be replaced today for $800. Under replacement cost, you get $800.
The catch: if you have a replacement cost endorsement, the insurance company will pay you actual cash value (ACV) until you replace the item. Once you replace the item, you are entitled to the replacement cost less whatever was previously paid. And most policies only give you 180 days to replace the items.
Check your policy to see if you are entitled to the actual cash value or replacement cost. If you do not have a replacement cost endorsement, ask for one.