Question

What amount would a person with actual cash value (ACV) coverage receive for three-year-old furniture destroyed by a fire? The furniture would cost $4,500 to replace today and had an estimated life of six years.

Answer 1

Answer:

The actual cash value a person would receive for a $4,500 destroyed furniture would be:

$3,000

Explanation:

Actual cash value is a method to calculate the value of an insured good. Its formula goes like this: Original value minus the original value divided by the years covered multiplied by two. In our case this would be 4,500-[4,500 / 6 x 2] giving us as result the following operation 4,500- 1500 = 3,000.