Definition
Actual cash value means your insurance pays what your damaged item is worth today, minus depreciation. That 10-year-old roof might be insured for half its replacement cost.
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Actual cash value (ACV) accounts for depreciation. Older items receive lower payouts. Less expensive but often inadequate to replace items.
Pro Tip
Avoid ACV coverage if possible. Replacement cost coverage costs a bit more but protects you far better.
Example
Actual cash value insurance paying $3,000 for 10-year-old roof worth $8,000 new.