Actual Cash Value (ACV) is a method used in insurance to determine the value of an item at the time of a loss. It is calculated by taking the replacement cost of the item and subtracting depreciation, which accounts for wear and tear over time. This means that if you have a damaged or stolen item, the insurance payout will reflect its current value rather than what you originally paid for it. For example, if you purchased a television for $1,000 five years ago, its ACV might be lower due to depreciation. If similar televisions are now available for $600, your insurance company may offer you that amount as compensation. Understanding ACV helps policyholders know what to expect when filing a claim.