Actual Cash Value is used to determine the value of insured property. Actual Cash Value (ACV) is calculated by subtracting depreciation from the replacement cost of the property. The actual cash value will always be less than the cost to replace the property.
Additional meaning of Actual cash value (ACV):
As an example: a man purchased a television set for $2,000 five years ago and it was destroyed in a hurricane. His insurance company says that all televisions have a useful life of 10 years. A similar television today costs $2,500. The destroyed television had 50% (5 years) of its life remaining. The ACV equals $2,500 (replacement cost) times 50% (useful life remaining) or $1,250.