What is the term for when an insured cannot claim full value for property in a damaged condition?

The term "Actual Cash Value" refers to the method used to determine the value of property at the time of a loss, factoring in depreciation. When an insured file a claim, the Actual Cash Value represents the fair market value of the property right before the loss occurred. This approach means that if property is damaged, the insured will not receive the full replacement cost for the item; instead, they will receive compensation that takes into account its age, condition, and market depreciation. This is particularly important in understanding coverage and ensuring that clients are aware that they may not receive enough money to buy a brand-new replacement for their damaged items.

In contrast, Replacement Cost refers to the cost to replace the lost or damaged item without factoring in depreciation. Full Coverage generally implies coverage for all types of losses without limits, while Indemnity is a broader principle that ensures an insured is restored to their financial position prior to loss without profit. Understanding Actual Cash Value is crucial for customers to accurately assess their insurance policy and potential claims.