How do insurance companies depreciate items in a home claim?
Short answer. Insurers depreciate items in a home claim one by one, using each item's age, its category's expected life, and its condition to reduce the replacement price. Short-lived categories like electronics and clothing lose value faster than furniture or appliances, and on a replacement cost contents policy that depreciation is paid back once you replace the item.
How a contents list gets depreciated
After a covered loss, such as a roof leak that ruins a bedroom, you list each damaged item with a description, its age, and what it costs to replace. The adjuster matches each item to a category and applies that category's expected life. A sofa, a television, and a winter coat from the same room will each get a different percentage.
What affects the percentage
- Category life. Electronics and clothing typically have shorter expected lives than solid wood furniture.
- Age. Receipts, bank records, photos, and online order history pin down purchase dates.
- Condition. Lightly used or heavily worn items can be adjusted.
- Like kind and quality. The replacement price is based on a comparable item sold today, not what you originally paid.
Getting the depreciation back
If your policy covers contents at replacement cost, the insurer pays actual cash value first and releases the depreciation as you replace items and send receipts. Policies usually set a time frame for this. If contents are covered at actual cash value only, the depreciation is not paid back.
Practical tips
- Photograph damaged items before discarding them, and keep them if the adjuster asks to see them.
- Keep a spreadsheet with item, age, quantity, and a link to a comparable replacement.
- Ask which category each item was placed in if the total looks low.
Related: interior water damage from a roof leak and ACV vs RCV.