Recoverable Depreciation: What It Is and How It Affects Your Insurance Claim

When your property is damaged—whether by a storm, fire, or another covered event—filing an insurance claim is the first step toward getting back on your feet. But once your claim is processed, you might encounter a term that raises more questions than answers: recoverable depreciation.

So what exactly is recoverable depreciation? How does it impact your insurance payout? And what do you need to do to get it back?

Let’s break it down.

What Is Depreciation?

In insurance terms, depreciation is the decrease in an item’s value over time due to age, wear and tear, or obsolescence. For example, a 10-year-old roof or a used washing machine is not worth as much as when it was new.

When you file a claim, your insurance company typically subtracts depreciation from your claim amount—unless your policy includes recoverable depreciation.

What Is Recoverable Depreciation?

Recoverable depreciation is the portion of the depreciation that your insurance company agrees to reimburse after you’ve completed the repairs or replacement of the damaged property.

It applies only if you have a replacement cost value (RCV) policy—not an actual cash value (ACV) policy.

ACV policy = You receive the item's value minus depreciation.

RCV policy = You first receive the ACV payment, and the rest (recoverable depreciation) is reimbursed after proof of repair or replacement is submitted.

Example:

You have a roof that was damaged by hail.

Replacement cost: $10,000

Depreciation: $3,000

Deductible: $1,000

Initially, the insurance company pays you:

$10,000 (cost) - $3,000 (depreciation) - $1,000 (deductible) = $6,000

Once you replace the roof and provide receipts, you receive the recoverable depreciation:

$3,000 (if eligible and documented)

Total reimbursement: $9,000 (the full cost minus your deductible)

How Do You Recover the Depreciation?

To receive the recoverable depreciation:

Review your policy

Confirm that your policy includes replacement cost coverage—not just ACV.

Complete repairs or replacement

Insurers usually require the work to be completed within a set timeframe (often 180 days from the date of loss).

Save all documentation

Keep invoices, receipts, and before/after photos of the repairs or replacements.

Submit a request

Send proof of completed work to your insurer along with a formal request for the recoverable depreciation.

Follow up

Stay in contact with your claims adjuster to ensure timely processing of your additional payment.

Why Doesn’t the Insurance Company Just Pay It All at Once?

Insurers withhold depreciation to:

Ensure that you actually complete the repairs

Prevent fraud or inflated claims

Align payouts with real replacement costs

It’s a safeguard for both the insurer and the policyholder, but it does mean you may need to front some of the repair costs initially.

Tips for Policyholders

Check your policy before disaster strikes: Know whether your policy covers replacement cost and includes recoverable depreciation.

Ask about time limits: Don’t miss the deadline to submit your proof of repair.

Work with licensed contractors: This ensures legitimacy and helps with smoother documentation.

Communicate with your adjuster: If you’re unsure about anything, ask your adjuster to clarify what’s required to receive the full payout.

Final Thoughts

Recoverable depreciation can significantly impact the amount of money you receive after an insurance claim. While it requires extra steps, knowing how it works ensures you get the full value of your coverage.

If you’re unsure whether your policy includes recoverable depreciation—or if you’re in the middle of a claim—talk to your insurance agent or claims adjuster for guidance. A little knowledge upfront can make the recovery process smoother and more financially secure.

Still have questions about depreciation or replacement cost coverage? Drop them in the comments or reach out for personalized advice.