Florida Health Insurance Terms:
What is "Actual Cash Value?"
The Definition Of Actual Cash Value:
In very simple terminology, your actual cash value of a policy will depreciate over time and be equal to the value of the insurance claims assessment, or the liquid "value" of your policy that can be pulled out. Although many think they have a very good insurance depreciation calculation, but will really vary based on the person to be insured. The insurance carrier or individual person will use a insurance claims adjuster along with a variety of other items that need to be listed. Actual cash value (ACV) is a known tool used in the insurance industry to benchmark values within a contract.
Some of the terms like ACV can be used across many types of insurance. Many use actual cash value for the dollar amount you could get for your home. Others might think ACV is used soley for understanding how much your life insurance policy is worth. In either case understanding that the Actual Cash Value (ACV) is understood easily by subtracting depreciation from the replacement cost. You can calculate depreciation by understanding the useful life of the item and determining what percentage of it is still left.
Can I Have An Example Of Actual Cash Value?
A good example is: a person buys a bed set for $3,000 10 years ago and it was destroyed in a flood. Her insurance carrier says that all bed room sets have a useful life of 20 years. If you were to buy a new bed set today it costs $5,500. You now know that the destroyed bed set had 50% (10 years) of its life still remaining. The ACV would be the $5,500 (replacement cost) times 50% (useful life remaining) or $2,750. Find more information on ACV below:
Article on ACV: Learn More About Actual Cash Value Here
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