How does recoverable depreciation work on an insurance claim, and why is it held back?

The policy language behind it

Standard homeowners forms used by many carriers settle buildings at replacement cost, but with a condition: the company pays no more than actual cash value until actual repair or replacement is complete. The idea is indemnity. Insurance restores what you lost, and a brand new roof on a house whose old roof was 15 years into its life is worth more than what was damaged until the money is actually spent rebuilding.

Three details most people never read

• The small loss rule. Many standard forms pay full replacement cost right away when the damage costs less than 5 percent of the building's coverage amount and less than $2,500.
• The 180 day notice. Common forms let you take actual cash value first and claim the rest later if you tell the insurer within 180 days of the loss that you intend to repair or replace. Carriers' own forms may use other periods.
• Not more than you spend. The final payment is capped at the smaller of the estimate's replacement cost or what you actually paid.

How it works across one home claim

Each part of a claim follows its own terms. The roof and siding fall under dwelling coverage and are usually recoverable. A fence is often paid at actual cash value only. Contents follow their own rules, recoverable only if you have replacement cost on personal property. One claim can show recoverable depreciation for the house and none for the fence.

What to do with this

Read the loss settlement section of your policy, note the deadline in your first payment letter, and do not let the job drift for months. See ACV vs RCV and Georgia roof claim deadlines.