What Is Depreciation On Home Insurance? 
There are two methods of calculating the value of loss items in insurance : Replacement Cost Value -LRB- or RCV -RRB- , and Actual Cash Value -LRB- or ACV -RRB- . Depreciation is used to calculate ACV . With RCV , you are only concerned with the replacement cost of the loss items . For example , ifI purchased a 32 inch flat screen TV 5 years ago , I might have paid $ 900 for the TV . But tobuy that exact same TV now might only cost $ 200 . So , I would get RPV of $ 200 , because that is the cost to replace my loss item . -LRB- This could also work the other way . If that exact same TV now is $ 1,200 , I would get that amount instead -RRB- . With ACV , we use depreciation to determine the actual cash value of the loss item . So with my $ 900 TV that I bought 5 years ago , each year that I 've owned the item its ` valuewill be less . Eventually , my TV will only beworth the amount I could get to scrap it . After 5 years , that TV is only worth $ 50 , because the actual value of that TV has depreciated . 