What does the term "actual cash value" refer to in property insurance?

The term "actual cash value" in property insurance is best defined as the current market value of the property after accounting for depreciation. This concept reflects the amount an insurer would typically pay to replace damaged or destroyed property, considering its age and wear.

In property claims, determining the actual cash value is crucial because it provides a realistic assessment of what the property is worth at the time of the loss, rather than simply what it would cost to replace it with a brand-new equivalent. Thus, option B effectively captures this definition by stating it as the current market value minus depreciation, which aligns with how insurers evaluate claims.

The other options do not accurately represent the concept of actual cash value. The replacement cost of property refers to what it would cost to replace an asset without factoring in depreciation, which is fundamentally different from actual cash value. The initial purchase price indicates what the property cost at the time of purchase, which again does not take into account wear and tear. Lastly, the assessed value for tax purposes refers to a value determined for taxation and may not reflect the current market conditions or depreciation relevant to insurance claims.