Depreciation & Actual Cash Value Calculator
Estimate the depreciation amount and actual cash value (ACV) of an insured item using the straight-line depreciation method commonly used by insurance companies.
Formulas Used
Annual Depreciation ($):
Annual Dep = (RCN − Salvage Value) ÷ Useful Life
Total Accumulated Depreciation:
Total Dep = Annual Dep × Age (capped at Max Depreciation Cap %)
Actual Cash Value (ACV):
ACV = RCN − Total Dep (ACV ≥ Salvage Value)
Annual Depreciation Rate (%):
Rate = (Annual Dep ÷ RCN) × 100
Assumptions & References
- Straight-Line Method: Depreciation is spread evenly over the item's useful life — the standard approach used by most property & casualty insurers for ACV claims.
- Replacement Cost New (RCN): The cost to replace the item with a new equivalent at today's prices, not the original purchase price.
- Salvage Value: The estimated residual value of the item at the end of its useful life. Defaults to $0 if not specified.
- Depreciation Cap: Many insurers cap total depreciation at 80% of RCN to ensure the ACV never falls below a minimum threshold. Adjust as per your policy terms.
- Useful Life Guidelines: The IRS Publication 946 and industry tables (e.g., Xactimate, Marshall & Swift) provide standard useful-life estimates by item category.
- ACV vs. RCV: ACV policies pay the depreciated value; Replacement Cost Value (RCV) policies pay the full RCN. This calculator computes ACV only.
- Reference: ISO (Insurance Services Office) and NAIC guidelines on property loss settlement and depreciation methodology.