How this calculator works
Actual cash value is replacement or purchase cost less the depreciation already used up. Insurance policies that settle on an actual cash value basis pay this amount, while replacement cost policies pay what a new item would cost. The simplest model spreads the purchase price evenly over an expected life, so an item halfway through its life is worth half its price. Real depreciation is rarely perfectly straight: electronics fall faster, and well-maintained machinery can hold value longer. Treat the answer as a starting point for a settlement discussion rather than an appraisal.
Formula
Annual depreciation = purchase price / expected life. Actual cash value = purchase price - annual depreciation × age, which is the same as purchase price × (1 - age / expected life). Age cannot exceed the expected life in this model, so the value never goes below zero.
Worked example
A $20,000 machine with a 5 year life that is 2 years old has lost $4,000 a year, so its actual cash value is $20,000 - $8,000 = $12,000.
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Frequently asked questions
Does actual cash value include salvage value?
This calculator assumes no separate salvage value, so the value reaches zero at the end of the expected life. If the item keeps a resale value, add that salvage amount back to the answer, or use the depreciation calculator with a salvage value.
How is actual cash value different from replacement cost?
Replacement cost is what it would take to buy a comparable new item today. Actual cash value deducts the depreciation of the old item. The gap is usually largest for items that are old but still expensive to replace.
Which life should I use?
Use the useful life stated by the manufacturer, the insurer or the tax authority for that asset class. A shorter life raises annual depreciation and lowers the current value. Changing the assumption is often the main point of dispute in a claim.