Actual Cash Value (ACV)
Actual Cash Value (ACV) is the depreciated value of your damaged equipment or property — what it's worth today, not what it would cost to replace it new.
What You Need to Know
If your 5-year-old commercial oven is destroyed in a fire and you have ACV coverage, you'll receive a payout based on what that used oven is worth, minus wear and tear. This is usually significantly less than buying a brand-new replacement.
How ACV is calculated:
- Original purchase price of the equipment
- Minus depreciation based on age and condition
- Equals your payout (often 40-60% less than replacement cost)
Example: a commercial refrigerator cost $8,000 new five years ago. A fire destroys it. With ACV coverage: original value $8,000, minus depreciation of roughly $4,800, for an ACV payout near $3,200 — against a new replacement cost of $9,500, leaving you with roughly $6,300 out-of-pocket.
Why It Matters for Restaurant Owners
ACV policies have lower premiums but leave you paying out-of-pocket for the difference between depreciated value and replacement cost. For expensive kitchen equipment, this gap can be thousands of dollars.
Common equipment with large ACV gaps:
- Commercial ovens and ranges — can depreciate $5,000-$15,000 over their lifespan
- Walk-in coolers and freezers — depreciation can exceed $10,000 in 5-7 years
- Hood and ventilation systems — may lose $8,000-$12,000 in value over time
- POS systems and technology — depreciate rapidly, often 50% in 2-3 years
Most restaurant owners benefit from Replacement Cost coverage instead. It typically costs 10-20% more in premium, but a major kitchen fire affecting multiple pieces of equipment could otherwise leave you with $20,000-$50,000 in out-of-pocket costs under ACV.
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