What does recoverable depreciation mean in homeowners insurance?
Short answer. In homeowners insurance, recoverable depreciation is the part of a covered loss your insurer withholds until you repair or replace the damaged property, then pays under your policy's replacement cost loss settlement condition. The less recoverable depreciation line on your estimate shows how much is being held back.
Where it lives in your policy
- Declarations page: shows your coverages, limits, deductibles, and the list of endorsements.
- Section I Conditions, Loss Settlement: explains whether buildings and contents are paid at replacement cost or actual cash value.
- Endorsements: can change the roof to actual cash value, add replacement cost on contents, or add a payment schedule.
The typical replacement cost promise
For buildings, many homeowners policies pay the smallest of the policy limit, the cost to replace with like kind and quality, or the amount actually spent. They pay no more than actual cash value until the repair is complete. That gap is your recoverable depreciation.
How the estimate line fits
On your estimate, the less recoverable depreciation line applies that rule. It is subtracted now and owed once you finish.
Questions for your agent
- Is my roof on replacement cost or actual cash value?
- Are my contents on replacement cost?
- How long do I have to finish repairs after a loss?
- Will my roof's age change any of this at renewal?
Related: ACV vs RCV, roof payment schedules, and whether insurance covers roof replacement.