How Does Depreciation Work in a Restoration Claim?

Depreciation is the decrease in value of your belongings or home materials over time. When you file a claim, your insurance company calculates how much your damaged item was worth just before the loss, not what it costs to buy new. That older value is called actual cash value, and it is what you typically get first.

For example, a five-year-old water heater might be worth less than a brand-new one, even though replacing it costs the same. The difference between the replacement cost and the actual cash value is the depreciation. Your policy determines whether you can recover that difference later, so check your coverage details.

Insurers use a formula that considers the item's age, expected lifespan, and condition. For building materials like roofing or drywall, depreciation is based on the material's age and the estimated useful life. For personal belongings, they may use a percentage per year or a schedule.

Keep receipts, photos, and records of when you bought items and what you paid. This documentation helps the adjuster assign a fair value. Without proof, the calculation may be lower than you expect. You can also ask for a copy of the depreciation schedule used for your claim.

One mistake is throwing away damaged items before the adjuster sees them. That can reduce your claim amount or cause a denial. Another is waiting too long to replace items, which may mean missing the deadline for recoverable depreciation.

Also, do not assume your policy covers everything. Policies vary, and your insurer decides what is covered. Ask questions before you start repairs. If you are unsure about your coverage, a professional can review your policy with you, but only your insurance company can make final decisions.