What is the formula for calculating Actual Cash Value (ACV)?

The formula for calculating Actual Cash Value (ACV) is indeed Replacement Cost Minus Depreciation. This method accurately reflects the current value of an asset by considering how much it would cost to replace it with a similar item at today's prices and then adjusting that amount to account for wear and tear or obsolescence.

In essence, ACV provides a realistic assessment of what an insured party would receive in the event of a loss, ensuring that the insured is compensated for the diminished value of the property. This calculation is crucial in property and casualty insurance as it helps both insurers and insureds arrive at fair settlement amounts for claims.

Other options, such as market value combined with depreciation or improvement costs, do not align with the standard industry practice for determining ACV. Furthermore, including land value in a calculation for ACV would not be appropriate since ACV pertains to the structure itself rather than the land it occupies.