Idaho Property and Casualty Practice Exam 2026 - Free Practice Questions and Study Guide

Actual cash value is determined by taking the replacement cost of an item and subtracting any depreciation that has occurred over time. This means that actual cash value represents the current worth of an item, reflecting its age, wear and tear, and overall condition at the time of the loss. In contrast, replacement cost provides coverage for the cost to replace an item with a new, similar item without deducting for depreciation. This distinction is crucial in property insurance as it affects the amount of compensation an insured may receive in the event of a loss. Understanding this difference helps insured individuals make informed decisions about their coverage options and the financial implications related to claims.