Which option correctly describes the actual cash value of a damaged property?

The actual cash value of a damaged property is defined as the replacement cost minus depreciation. This approach recognizes that as an item ages, it loses value due to wear and tear or obsolescence. When determining the actual cash value, the insurer looks at what it would cost to replace the item with a similar one at current prices and then subtracts the depreciation that has occurred since the original purchase.

This method provides a fair assessment of what a property is worth at the time of the loss, which reflects both current market conditions and the property’s age and condition. It's important in insurance to ensure that claim settlements are equitable and consider the true worth of the property rather than merely the cost to replace it with a brand new item.

The other options present different concepts. The full replacement cost without any deductions does not account for depreciation, which is critical in evaluating actual cash value. The cost of similar property on the market today is related to market value but differs from actual cash value, which specifically considers depreciation. Lastly, the insured value assigned at the start of the policy refers to the predetermined amount of coverage, which can be different from the actual cash value determined at the time of loss.