Determining Actual Cash Value for Personal Property Jeff Wepman asked 2 years ago
Determining Actual Cash Value for Personal Property

We plan to determine a replacement cost value (RCV) for our personal property inventory items that include the price of the item, the shipping cost, and tax. When determining the actual cash value (ACV) from the RCV, it is our understanding that tax should not be depreciated. Is that correct? Should the shipping cost be depreciated as well as the price of the item?

As far as the amount of depreciation to apply, we plan to use the following condition categories to arrive at the ACV.

Excellent – Depreciate RCV by 10%

Very Good – Depreciate RCV by 20%

Good – Depreciate RCV by 35%

Fair – Depreciate RCV by 50%

Poor – Depreciate RCV by 80%

Is this a reasonable amount of depreciation to apply?

Thank you.

2 Answers
Chris Rockers Chris Rockers Expert answered 2 years ago

Jeff – it is wise to include not only an accurate/supported replacement cost value (RCV) for each entry on your Personal Property inventory, but also a supported actual cash value (ACV). The categories you have captured are useful – and the quality, care, use, and condition of possessions should be factored into determining a supported ACV. Importantly – you will also need to provide an approximate age for each entry, per the policy. Insurance company representatives (to include those who review and process PP inventories) primarily focus on the age alone and apply depreciation based upon internal/unknown guidelines considering age alone. In your example – an entry for a leather chair in excellent condition that is 10 years-old would be depreciated the same as a 1 year-old leather chair in excellent condition. The carrier will focus on age – you will need to support why factors other than age are to be considered. While including shipping costs or an allowance for shipping is supported – carriers will question if included for every entry. As for tax – depreciation will be applied based upon the overall RCV to include tax. Good luck on your submission – carriers must consider your input and be willing to meet/discuss differences to resolve.

Answer for Determining Actual Cash Value for Personal Property United Policyholders Staff answered 2 years ago

Hi Jeff,

United Policyholders also has some tools that you can use to help calculate depreciation and generate your inventory. Please visit the sample letters section of our website, and scroll to the bottom to the Personal Property Claim Documents and Resources section. Expand that section to find downloadable, modifiable spreadsheets and resources to assist you with this difficult task. You might also be interested in joining our Pricing Party event, taking place this Saturday, December 3rd, to help you price your contents. Good luck!