What is Recoverable Depreciation?

Name: Excel Adjusters
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Recoverable depreciation (in homeowners insurance) refers to a concept related to property insurance claims, specifically for items that have depreciated in value over time, and have been damaged, destroyed, or stolen. It is the amount deducted from the replacement cost of damaged property in an insurance claim, which can then be reclaimed after the item has been repaired or replaced.

For example, let’s say your television is stolen. It was initially valued at $1,000, but due to its age, the recoverable depreciation is $300. You replace the TV for $900, then file a claim with your insurance company, which then reimburses you $300, covering the deducted depreciation amount.

When you make a claim for damaged or destroyed property covered by your homeowner insurance policy, the insurance company might initially provide you with the Actual Cash Value (ACV) of the damaged item. The Actual Cash Value takes into account the item's original cost and subtracts depreciation to determine its current value. Depreciation considers factors such as the item's age, condition, and wear and tear, which can reduce its worth.

However, it’s important to note that not every home insurance policy includes recoverable depreciation coverage.

When is Recoverable Depreciation Applied Under an Insurance Claim?

If you had any items on your property stolen or damaged, recoverable depreciation might be applied (assuming your insurance policy includes this type of coverage). To claim recoverable depreciation, you typically need to provide proof of the repair or replacement costs, and the insurance company will reimburse you for the recoverable depreciation amount.

For example, if your roof is damaged in a storm, your insurance company might initially provide you with the ACV of the roof, considering its age and condition. After you repair or replace the roof, you can submit the receipts and documentation to your insurer, and they will then reimburse you for the recoverable depreciation amount.

Calculating Recoverable Depreciation

Calculating recoverable depreciation involves determining the depreciation amount of a damaged or destroyed item and working with the insurance company to recover the depreciation after the item has been repaired and replaced. The first step is calculating the Actual Cash Value of the damaged item. It’s determined by subtracting depreciation from the item’s replacement cost. The formula for ACV is:

ACV = Replacement Cost – Depreciation

Here’s a recoverable depreciation example: Let’s say your roof was damaged in a hail storm and the cost to replace it is $10,000. Due to depreciation, the insurance company initially calculated the ACV at $7,000.

You have the roof repaired and spend $9,000.

You then submit documentation to the insurance company, and the insurance company might reimburse you the $2,000 difference, which is the recoverable depreciation amount ($9,000 repair cost – $7,000 ACV).

The insurance company’s process involves assessing the replacement cost value of damaged items and determining the recoverable depreciation. Once repairs are completed, policyholders can submit receipts for reimbursement, receiving a recoverable depreciation check to bridge the gap between the initial assessment and the full replacement cost.

What is the Process for Submitting a Recoverable Depreciation Claim?

The first step for submitting a recoverable depreciation claim is understanding your policy. You’ll want to make sure it includes a provision for recoverable depreciation since not all policies offer this. After confirming your homeowners insurance policy includes recoverable depreciation, you’ll want to:

Document the Damage (take photos of the damage, videos, and receipts, and make a detailed inventory of the items affected)
Determine the Actual Cash Value
Repair or Replace the Damaged or Stolen Item
Submit Documentation to the Insurance Provider (this lets them know you have repaired or replaced the damaged item and involves providing them with the images, videos, receipts, and other proof of expenses)
Wait for the Insurance Company Evaluation (they’ll evaluate the documentation you’ve submitted and might send an insurance adjuster to inspect the repaired/replaced item)
Receive Your Reimbursement (if the insurance company approves your recoverable depreciation claim, they will reimburse you for the depreciation amount you initially subtracted to calculate the ACV)

Which Items are Eligible For Recoverable Depreciation?

The following are sometimes eligible under recoverable depreciation. However, this can vary based on your specific coverage:

Personal property
Structural elements
Home appliances and systems

How Long Do I Have to Submit a Claim for Recoverable Depreciation After Repairs or Replacements Are Made?

The timeline to submit a claim for recoverable depreciation after repairs or replacements are made can differ based on your insurance policy and the insurance company's guidelines. It's important to check your policy or contact your insurer to understand the specific timeframe for submitting such a claim.

How Can A Licensed Public Adjuster Help with Recoverable Depreciation?

The goal of a licensed public adjuster is to ensure your rights are upheld during the claims process and maximize your payout. If you experience property damage and need help with the recoverable depreciation home insurance claim, we’ll help to:

Notify Your Insurance Provider
Submit Documentation
Guide You Through the Entire Recoverable Depreciation Process
Assist with Every Stage of the Claims Process
Maximize Your Payouts

Licensed public adjusters know how to speak with insurance carriers about recoverable depreciation. They are completely independent of insurance companies and work solely for you, the policyholder.

If you’ve experienced property damage and need help with the recoverable depreciation process, our team is available to assist.