Actual cash value and depreciation calculator
See how an insurer turns replacement cost into actual cash value. Enter the cost to replace the damaged item, its age and its expected life, and the calculator shows the depreciation, the first ACV payment and the recoverable depreciation you can claim after repairs.
How actual cash value is calculated
Depreciation = Replacement cost × (Age ÷ Life expectancy), and Actual cash value = Replacement cost − Depreciation.
This is straight-line depreciation, the method most adjusters learn first. Real estimates often adjust for condition and maintenance, and some items lose value faster in the first years.
Worked example
A 8-year-old roof with a 20-year life costs $12,000 to replace. The deductible is $1,000.
- Depreciation: $12,000 × (8 ÷ 20) = $4,800
- Actual cash value: $12,000 − $4,800 = $7,200
- First payment on a replacement cost policy: $7,200 − $1,000 = $6,200
- After the roof is replaced, the insurer releases the $4,800 holdback, for a total of $11,000.
On an ACV-only policy, $6,200 is the full payment.
Replacement cost versus actual cash value policies
Homeowners policies usually pay replacement cost on the dwelling when the home is insured to at least 80% of its replacement cost, and actual cash value on personal property unless a replacement cost endorsement is added. Commercial property forms default to ACV unless the replacement cost option is chosen. Our 80% rule calculator shows what happens when a home is underinsured.
Frequently asked questions
What is actual cash value?
Actual cash value (ACV) is what damaged property was worth at the time of loss. Most policies and courts calculate it as replacement cost minus depreciation, although some states use fair market value or a broad evidence rule. ACV pays you for a used item, not a new one.
What is recoverable depreciation?
On a replacement cost policy, the insurer usually pays the ACV first and holds back the depreciation. Once you repair or replace the property, you submit proof and the insurer releases the held-back amount, called recoverable depreciation, up to what you actually spent.
How do adjusters choose a life expectancy?
Adjusters use depreciation guidelines from their company or estimating software, manufacturer data and the item's condition. A 30-year roof, a 15-year water heater and a 10-year carpet age very differently, and good maintenance can reduce depreciation.
Can depreciation be applied to labor?
It depends on the state. Some states prohibit depreciating labor costs when calculating ACV and others allow it. This calculator depreciates the full replacement cost you enter, so enter materials only if your state bars labor depreciation.