Which type of policies pay out on an Actual Cash Value (ACV) basis?

Actual Cash Value (ACV) is a method of valuation that takes into account the replacement cost of an asset minus depreciation. Basic Dwelling Fire Policies are designed to provide coverage for property damage and typically pay claims based on ACV. This means that if a loss occurs, the insurer will reimburse the policyholder for the current value of the damaged property considering wear and tear or obsolescence.

In contrast, Comprehensive Coverage Policies may offer coverage that pays for the full replacement cost without a deduction for depreciation. Liability Coverage Policies, on the other hand, do not pay on an ACV basis since they address legal responsibility for damage to others rather than property loss for the policyholder. Business Interruption Policies cover lost income due to a disruption in business operations but also do not operate under an ACV structure, as they focus on the loss of earnings rather than physical property valuation.

Thus, Basic Dwelling Fire Policies are the correct answer as they operate under the actual cash value principle, providing payouts based on current market value accounting for depreciation.