What does non-recoverable depreciation mean?
Short answer. Non-recoverable depreciation is the portion of a claim the insurer subtracts for age and wear and will never pay, even after you repair or replace the item. It applies when your policy settles that property at actual cash value instead of replacement cost.
Where it comes from
- Actual cash value policies: everything is paid at depreciated value.
- ACV roof endorsements: the roof surfacing is paid at actual cash value for wind or hail while the rest of the house stays on replacement cost.
- Roof payment schedules: a table percentage replaces full cost, and the gap is never paid.
- Contents at ACV: many policies pay personal property at actual cash value unless replacement cost was added.
- Items you choose not to replace: the depreciation on them stays with the insurer.
How it differs from recoverable depreciation
Recoverable depreciation is a holdback that comes back after the work. Non-recoverable depreciation is a permanent deduction. Both can appear on the same estimate; for example, the roof lines may be non-recoverable while the interior drywall is recoverable.
Can it be reduced?
The policy terms cannot be changed after a loss, but the inputs can be wrong. Check the roof age, the material, and the condition rating. A roof that is actually 8 years old but listed at 14 can lose thousands to that error. Also make sure every damaged item is in the scope, since a fuller estimate raises the actual cash value too.
Related: ACV vs RCV, roof payment schedules, and roof age and insurance.