Actual Cash Value Calculator
This actual cash value calculator estimates what an insurer would pay for a damaged or stolen item on an actual cash value basis, which is the cost to replace it new today less depreciation for its age and wear. Enter the replacement cost of a brand new equivalent, the age of your item in years and its expected useful life, and the calculator applies straight-line depreciation to give the actual cash value, along with the total dollars of depreciation deducted and the depreciation rate applied. Actual cash value, sometimes called indemnity value, is the settlement basis on many older vehicles, some contents items and any policy that pays market value rather than new-for-old, so the figure here is what you might receive rather than the price of a shiny replacement. The gap between replacement cost and actual cash value is exactly the depreciation, and it grows every year an item ages, which is why an old appliance or laptop can be worth far less at claim time than it feels like it should be. Use this to sense-check a settlement offer, to decide whether a replacement-value policy is worth the extra premium, and to understand why the payout on a ten year old item is a fraction of what a new one costs. Always read your own policy wording, because the basis of settlement, any excess and any special limits decide what you actually receive.
Straight-line method: ACV = replacement cost x (1 - age / useful life), not less than zero. Real insurers may use different depreciation schedules, salvage floors, excesses and special limits. Estimate only: your policy wording governs any actual payout.
How it works
Straight-line depreciation spreads an item's loss of value evenly across its useful life. The depreciation rate is the age divided by the useful life, capped at 100 percent once the item is past its expected life. Multiplying the replacement cost by that rate gives the dollars of depreciation, and subtracting it from the replacement cost leaves the actual cash value. In symbols, ACV = replacement cost x (1 - age / useful life), and the value never drops below zero. The wider the gap between replacement cost and actual cash value, the more depreciation the age of the item has stripped away.
Worked example
Your four year old dishwasher would cost 2,000 dollars to replace with a new equivalent, and dishwashers of this type have an expected useful life of 10 years. The depreciation rate is 4 / 10 = 40 percent, so the depreciation is 2,000 x 0.40 = 800 dollars. The actual cash value is 2,000 - 800 = 1,200 dollars. If your policy settled on a replacement basis you would receive the full 2,000 dollars less any excess; on an actual cash value basis you receive 1,200 dollars less any excess, because the 800 dollars of depreciation is deducted.
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