What Is Actual Cash Value?
<lingo>Actual cash value refers to the amount of money paid by an insurance company for property claims. There are several calculations an insurance company may use to arrive at an offer. For example, they may assess the item's fair market value to determine how to settle up with their customer.
Or they may subtract depreciation from the face value of either repairing or replacing an item. Finally, they may ask for general evidence to conclude how much to pay out. Those who are filing a claim should clarify how the insurance company will arrive at their number in case they need to prepare additional statements.</lingo>
Actual Cash Value Explained
Actual cash value is an insurance company's way of paying out what an item is really worth. However, it's not always easy to determine that amount, especially because our perception of value is subjective. If someone steals a 2015 plasma screen TV from your house, the insurance company has to take into account the wear and tear on that television and factor in the market demand for the item itself. You may think the television is worth close to what you originally paid for it, but the insurance company won't necessarily see it that way. That being said, some insurance companies will even take into account the perceived value of the item.
<twitter>Actual cash value is an insurance company's way of paying out what an item is really worth. However, it's not always easy to determine that amount, especially because our perception of value is subjective.</twitter>
Let's say you spent 50 hours refinishing an old hope chest and it burned to ash a fire. The actual cost value may not be very expensive, but it doesn't take into account the hours you spend toiling over the chest. Some insurance companies allow you to submit receipts or photos that show the process and prove the item's worth. (This is just one reason why it's so important to keep records of home improvement.) Or you may be asked to provide evidence of the market value of an item. So if you had an in-demand action figure still in its box, you could submit a quote from a credible source that reflects what the figure would fetch at an auction or sale.
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