Which of the following describes the term 'Actual Cash Value' in insurance?

Actual Cash Value (ACV) is defined as the fair market value of an item just before a loss occurs, factoring in depreciation. This means that ACV reflects what a property would sell for in an open and competitive market at the time of the loss.

Understanding ACV is crucial in insurance as it determines how much compensation an insured party will receive for damaged or stolen property. Unlike replacement cost, which covers the expense necessary to buy a new item without considering depreciation, ACV takes into account the age and condition of the property. This makes option C the accurate choice, as it properly describes how ACV is measured in the context of insurance claims.