Actual Cash Value Applied to Appraisal of Property Losses


A Video Explaining the Interpretation of Actual Cash Value

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Determining the actual cash value of an item of personal property is often difficult and is subject to different interpretations across multiple jurisdictions. When an insurer and insured cannot agree on the amount of actual cash value loss they have the right to seek appraisal — a limited form of arbitration that may only determine the amount of actual cash value and loss.

Depending on the wording of the policy or local state law Actual Cash Value (ACV) can be determined by subtracting from full replacement cost depreciation, based on the age and usefulness of the property involved. In other jurisdictions or because of various policy wordings, ACV can be the difference between the fair market value (FMV) of the item before the loss and its FMV after the loss.

Some states apply the broad evidence rule and will take into consideration the use of depreciation, consideration of FMV, or any other evidence that will provide true ACV to the insured.

Limiting coverage to ACV does result in lower premiums, but it could end up leaving the insured with a large gap between the amount of the indemnity recovered after a loss. ACV may not be sufficient to rebuild the dwelling or replace the contents.

For example, if the structure of the dwelling is in poor physical condition, is old, or was constructed with a design that is no longer popular its FMV might be very small with most of its value in the land. In some cases, the structure even detracts from the full value of the land and structure so its ACV may be zero while its replacement cost could be $500,000 or more. It is imperative, therefore, before selecting a policy limit that the insured understands the structure’s ACV and its full RCV.

© 2021 – Barry Zalma Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders.

He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business.

He is available at and Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award. Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the podcast Zalma On Insurance at;  Follow Mr. Zalma on Twitter at; Go to Barry Zalma videos at at; Go to Barry Zalma on YouTube-; Go to the Insurance Claims Library – Read posts from Barry Zalma at; and the last two issues of ZIFL at  podcast now available at

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