What Is Recoverable Depreciation?

Your homeowners insurance policy will have specific details about reimbursement.

When filing an insurance claim for damage to your house, knowing the methods of claim valuations can help you determine how much the insurance company will reimburse you for your losses.

Types

Some policies only cover the actual cash value, or ACV, of damaged property--the cost to repair or replace damaged furniture, fixtures and portions of the home's structure. Other policies provide an accounting for nonrecoverable and recoverable depreciation. Insurers call the difference between the cost of repairs and the property's value before the damage--money the homeowner can't get back--nonrecoverable depreciation. With recoverable depreciation, however, the insurance carrier reimburses the homeowner the difference between repair or replacement and the pre-damage value.

Policy

The reimbursement you file for depends upon the type of policy you have, and riders included in your homeowner's insurance contract. If you have an ACV policy with no riders, you won't receive recoverable depreciation.

Reimbursement

After you file your claim and an adjuster reviews and approves it, the insurance company issues a check for the estimated value of the repairs. Some carriers include recoverable depreciation in advance, while others require completion of repairs first. Contacting your insurance agent will help you determine which method the provider uses, and if you need additional documentation and/or claim forms.

References

• USACoverage.com: Let's Talk About Depreciation