Does insurance pay recoverable depreciation, and what is it?
What recoverable depreciation is
When an adjuster prices your damage, the estimate starts at replacement cost value (RCV), the price to do the work new today. The adjuster then subtracts depreciation for the age and condition of what was damaged. When your policy settles that property at replacement cost, the subtraction is recoverable: the insurer holds it back instead of taking it away.
When the insurer pays it
Most homeowners policies say the company pays no more than actual cash value until the repair or replacement is actually complete. After that, it pays the difference, up to the smaller of the estimate or what you actually spent. In practice you send:
- The contractor's final invoice showing the work and the total
- Completion photos or a certificate of completion, if the insurer asks
- Any supplement items the crew found, so they are added before the release
When it does not get paid
- Roof paid at actual cash value. An ACV roof endorsement or a roof payment schedule turns roof depreciation into non-recoverable depreciation.
- No repair. If you keep the first check and never fix the roof, the holdback stays with the insurer.
- Missed deadline. Many policies require notice that you intend to repair within a set period, often 180 days from the loss, though carriers vary.
- Cheaper job. If the work costs less than the estimate, you recover only what you actually spent.
Read the loss settlement section of your policy and the endorsements listed on your declarations page. For the roof side, see how recoverable depreciation works on a roof and ACV vs RCV roof claims.