ACV policies pay what the item was worth at the time of the loss; replacement cost policies pay what it costs to buy new. The difference can be large for older items like roofs, electronics and furniture.
How to use the Actual Cash Value Calculator
- Replacement cost
- Age of the item
- Expected lifespan
- Deductible
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter the replacement cost (or purchase price), the item’s age, its expected lifespan and your deductible.
Tips
- Use consistent periods (a year or a quarter) for flow figures and period-end values for balances.
- Average opening and closing balances when a ratio mixes a flow with a stock.
- Benchmark against competitors in the same industry.
- Read the ratio together with others – profitability, liquidity and efficiency tell different stories.
Common mistakes to avoid
- Using sales instead of cost of goods sold for inventory ratios.
- Mixing gross, operating and net profit.
- Ignoring one-off items that distort a single year.
Inputs explained
| Field | What to enter |
|---|---|
| Replacement cost | Amount in your currency |
| Age of the item | In years |
| Expected lifespan | In years |
| Deductible | Amount in your currency |
What each result means
- Depreciation = [Replacement cost]×min([Age of the item]÷[Expected lifespan], 1)
- Actual cash value = [Replacement cost] – [Depreciation]
- Insurance payout after deductible = max([Actual cash value] – [Deductible], 0)
- Payout under replacement cost cover = max([Replacement cost] – [Deductible], 0)
Example values
How the main result changes when Replacement cost changes and everything else stays at the example values above:
| Replacement cost | Actual cash value |
|---|---|
| 1,000 | 700 |
| 1,500 | 1,050 |
| 2,000 | 1,400 |
| 2,500 | 1,750 |
| 3,000 | 2,100 |
| 4,000 | 2,800 |
Formula
Depreciation = replacement cost × age ÷ expected lifespan (straight line)ACV = replacement cost − depreciationPayout = ACV − deductibleWorked example
Inputs — Replacement cost: $2,000; Age of the item: 3 years; Expected lifespan: 10 years; Deductible: $250.
Results — Depreciation = $600.00; Actual cash value = $1,400.00; Insurance payout after deductible = $1,150.00; Payout under replacement cost cover = $1,750.00.
Frequently asked questions
What is actual cash value?
Replacement cost minus depreciation.
What is the difference between ACV and replacement cost?
Replacement cost doesn't deduct depreciation.
How is depreciation estimated?
Usually by age relative to the item's expected life, adjusted for condition.
What formula does the Actual Cash Value Calculator use?
Depreciation = replacement cost × age ÷ expected lifespan (straight line).