The cost of the replacement minus depreciation is the definition of:

The definition of "the cost of the replacement minus depreciation" corresponds with the concept of Actual Cash Value (ACV). ACV represents the value of an asset at a given time, taking into account its depreciation based on wear and tear, obsolescence, and age.

When an insurance policy uses Actual Cash Value, it typically means that in the event of a claim, the insured would receive compensation that reflects the current worth of the item rather than the full cost to replace it with a new one. This approach acknowledges that assets lose value over time due to various factors, meaning the payout will be less than the original purchase price or replacement cost.

In contrast, Replacement Cost refers to the expenses incurred to replace an item with a new one of similar kind and quality, without accounting for depreciation. Market Value represents the amount for which an asset would sell in the current market, influenced by factors such as demand and supply, rather than depreciation. A Valued Policy typically pays a set amount agreed upon at the time the policy is established, regardless of the current replacement costs or depreciation.

Understanding these distinctions is crucial in personal lines insurance, as they significantly affect coverage and claims outcomes.