What is the meaning of Actual Cash Value (ACV), and what does Replacement Value refer to?

“Current market worth (CMW)” denotes the value of the covered asset at the time of the incident. On the other hand, “Restitution worth” refers to the expense required for the replacement of the asset, ensuring complete restoration.
CMW incorporates depreciation, resulting in a significantly lower value than the cost of replacing your property. The determination of whether you will receive CMW or restitution worth depends on your policy; however, certain policies leave room for interpretation. The insurance firm will interpret it in a manner that benefits their interests.

“Actual cash value (ACV)” specifies the worth of the insured property during the occurrence of the loss. On the other hand, “replacement value” indicates the expense of substituting the property in order to restore its original state.
ACV accounts for depreciation, thereby potentially resulting in a significantly lower amount than the cost of replacing your property. The determination of whether you will receive actual cash value or replacement value is contingent upon the provisions in your policy. However, certain policies allow room for interpretation. The insurance company will interpret these provisions in a way that benefits their own interests.