Actual Cash Value Insurance Coverage

2/24/2022 (Permalink)

Actual Cash Value

One of the most arduous tasks of an adjuster is a balancing act involving the assignment of a value to items that are the subject of a claim while performing his or her responsibility of reducing a claim to a dollar amount. An ordinary insurance policy covering personal or real property provides that benefits payable for damaged or lost property are the “actual cash value” of such property at the time of loss.

The actual cash value is the price that one might anticipate an article or piece of property to bring if offered for sale in a fair market where there is a willing seller and a willing buyer. A forced sale or a price obtained at a public auction would be excluded as determinative of market value. The term “actual cash value” is defined under the laws of some states, and, in other jurisdictions, customary definitions have come into use because of court definitions.

When a market exists for used goods like the kind in question which may have been stolen or destroyed, the value can be measured against the price it would have brought in the open used market. An adjuster cannot reduce a claim to a dollar amount unless he or she knows what items have been lost or damaged. An adjuster will ask a claimant to prove ownership of an item which is the basis of a claim and may be suspicious if a policyholder asserts that he or she purchased a large amount of items for cash. When there is no public market for a used item, the actual cash value may be determined by taking the acquisition cost of a new item and subtracting an amount reflecting the used component of the item, which is called depreciation. Many carriers employ depreciation tables in evaluating what dollar amount to place on damaged property using the rule of thumb that an item loses value every year over its expected life. Even so, placing a dollar value on used personal property is quite subjective.

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