Ask an Instructor: Determining the Actual Cash Value (ACV) of Your Property

Ask an Instructor: Determining the Actual Cash Value (ACV) of Your Property

Monday, July 26, 2021 in Ask an Instructor

ISA members are invited to send in their questions on all things appraising and education to ISA's instructors. One of ISA's instructors will share answers on the ISA Now Blog. Please send questions to

Question: I have been asked by an insurance company to provide the actual cash value (ACV) on a painting by a famous 19th-century artist. I don’t understand how to determine ACV for this type of painting. Can you help me?

Answer: Of course! First, let’s look at the definition of actual cash value (ACV). The most common definition of ACV is replacement cost new less depreciation, but some jurisdictions define ACV as market value. It is wise to ask your client for the definition that they are using. Replacement cost new is the cost necessary to replace an item of personal property with a NEW item of like kind, utility, and having similar qualities within a reasonable amount of time in the relevant marketplace. It considers that items may be upgraded to the latest model or style. Depreciation, in this instance, typically refers to an incremental reduction in value based on age/life formulas commonly in use within the insurance industry. It is often the job of the appraiser to provide the replacement cost new, and then the adjuster assists with the depreciation part. This formula (ACV=RCN-depreciation) works well for property that is capable of being depreciated (such as clothing or common household items). But this formula does not work well for appreciable property like your painting by the famous 19th-century artist. In this case, you need to contact the insurance company and explain that ACV does not fit the subject painting as it is an appreciable property, not a depreciable property. Ask the agent/adjuster instead if they really meant for you to be determining the market value or the fair market value of the painting instead. In summary, when asked by an insurance company to determine ACV, first consider if the item being appraised is an appreciable or depreciable property. If depreciable, then proceed with the ACV calculation. If appreciable, then stop and ask more questions to clarify the appraisal objective.

By, Meredith Meuwly, ISA CAPP, Director of Education