Do insurance companies pay for depreciation?
Short answer. Yes, if you have replacement cost coverage: the insurer holds back the recoverable depreciation at first and pays it after you repair or replace the damaged property, up to what the work actually cost. If your roof is on actual cash value terms or a payment schedule, or a line item is marked non-recoverable, that depreciation is not paid.
How much they pay
The amount is the recoverable depreciation listed on your estimate, usually shown in the summary as recoverable depreciation or depreciation held back. No law sets it as a percentage. It depends on the age and condition of the damaged items and how much of the estimate is depreciated, and on an older roof with replacement cost coverage it can be a large share of the claim.
What limits the payment
- Actual cost: the insurer pays no more than you actually spent, up to the estimate.
- Completion: the work must be done, usually within a time limit in the policy.
- Non-recoverable items: some lines carry non-recoverable depreciation even on a replacement cost policy.
- Roof endorsements: ACV roof and payment schedule endorsements make roof depreciation non-recoverable.
Example
A hypothetical roof estimate shows $16,000 replacement cost, $6,400 of depreciation and a $2,000 deductible. The first check is $7,600. After the roof is replaced for $16,000, the insurer releases the $6,400, for a total of $14,000. Had the roof been replaced for $15,000, the release would usually shrink by $1,000.
How to make sure you get it
- Confirm on the estimate that the depreciation is recoverable.
- Note the deadline for completing the work.
- Have your roofer submit a final invoice that matches the estimate and any approved supplements.
Details are in recoverable depreciation and ACV vs RCV.