When homeowners file an insurance claim for damaged property, one common term they encounter is depreciation. Insurance companies use depreciation to reduce the amount they initially pay out on claims—but not all homeowners realize how it works or when they can recover the depreciated amount. As a Florida Public Insurance Adjuster, I often help homeowners understand and fight for the full settlement they deserve, including recoverable depreciation when applicable.
How and Why Depreciation is Calculated
Depreciation represents the loss in value of an item over time due to age, wear and tear, and use. When you file a claim, the insurance company typically determines your payout using two key values:
✔ Actual Cash Value (ACV): This is the current market value of the damaged property, factoring in depreciation. If you have an ACV-only policy, the insurance company will only pay this reduced amount.
✔ Replacement Cost Value (RCV): This is the full cost to replace the damaged item with a new one of similar kind and quality. If your policy includes Replacement Cost Coverage, you may be able to recover the depreciation later.
For example, if your 10-year-old roof sustains storm damage and the cost to replace it is $20,000, but the insurance company applies $8,000 in depreciation, your initial payout under ACV would be $12,000.
When Can Depreciation Be Recovered?
Not all depreciation is lost forever—it depends on your policy and whether you complete repairs.
✔ If You Have Replacement Cost Coverage: Most policies allow homeowners to recover the depreciated amount once they show proof that repairs or replacements were completed. In the roof example above, after replacing the roof and submitting receipts, you would receive the additional $8,000 withheld for depreciation.
✔ If You Have an ACV-Only Policy: Unfortunately, if your policy only covers ACV, depreciation is not recoverable, and you may have to pay the difference out of pocket.
✔ Contents & Personal Property: Many policies allow recoverable depreciation on personal property (furniture, electronics, appliances, etc.), but you usually need to submit receipts showing you replaced the items within a specific timeframe.
Final Thoughts
Understanding depreciation in your claim settlement is critical to ensuring you receive the full amount you’re entitled to. If you’re unsure whether you can recover depreciation—or believe your insurance company is unfairly applying it—contact a Public Insurance Adjuster. We can review your policy, negotiate with the insurer, and help you recover every dollar you deserve. Reach out today for a free claim evaluation!