What type of property is adjusted on an Actual Cash Value (ACV) basis?

Adjusting on an Actual Cash Value (ACV) basis typically refers to personal property. ACV is defined as the replacement cost of the property minus any depreciation. This method is commonly applied to personal property because such items often have a clear replacement cost and a depreciation schedule based on the wear and tear or age of the items.

For personal property—like furniture or appliances—the ACV approach allows for a more accurate reflection of the current value that takes into account factors such as condition and age. This is essential in claims processing since it determines how much compensation the insured might receive in case of loss or damage.

In contrast, commercial, industrial properties, and real estate often use different valuation methods, such as Replacement Cost or Fair Market Value, because these types of properties involve more complex valuation considerations and may not depreciate in the same manner as personal property.