Actual Cash Value
What is Actual Cash Value?
Actual Cash Value (ACV) is the amount your insurer pays for damaged or destroyed property, calculated by taking the replacement cost and subtracting depreciation based on age, condition, and wear. For your manufacturing facility, this applies to buildings, production equipment, and machinery.
Why it Matters for Manufacturers
Understanding ACV is critical because it directly affects what you will receive after a loss. A 10-year-old CNC machine that costs $200,000 to replace might only net you $120,000 under ACV coverage due to depreciation.
This gap can leave you significantly underfunded when rebuilding or replacing essential equipment. Many manufacturers opt for Replacement Cost coverage instead to avoid out-of-pocket expenses during recovery.
ACV vs. Replacement Cost Calculator
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Typical range: 3-5% for machinery