Many insurers routinely deduct overhead and profit factors from actual cash value (ACV) partial loss settlements. In light of bad faith concerns and the limited number of case authorities that have provided meaningful guidance to the insurance industry, the efficiency of such a practice may be questioned.
Many homeowners policies provide ACV coverage for homes, and an increasing number of insureds might qualify for replacement cost coverage. In cases where the insured has not paid the additional premium for replacement cost coverage, payments for damage to homes and contents are adjusted solely on the basis of actual cash value. While most policies do not define "actual cash value," many define "replacement cost."
