Which of the following describes Actual Cash Value (ACV)?

Actual Cash Value (ACV) is determined by taking the cost to replace the property and subtracting depreciation. This concept reflects the current worth of the item considering its age, wear and tear, and obsolescence. In the insurance context, ACV is commonly used to assess the compensation amount for a loss by calculating what it would cost to replace a damaged or lost item while factoring in its depreciation.

When evaluating other potential options, it's clear that the replacement cost minus improvements (as found in one of the options) does not accurately represent ACV, because ACV focuses specifically on depreciation rather than improvements. The listed value in the insurance policy refers to the coverage amount, which may not reflect the current market value. Finally, the price offered on the open market typically resembles market value rather than Actual Cash Value since it does not incorporate depreciation or the specifics of the insurance context. Thus, the definition that aligns with how ACV is defined in insurance terms is the cost to replace property less depreciation.