The Impact of Depreciation on Insurance Claims

Depreciation can have a significant effect on both residential insurance and commercial claims, especially when it comes to property damage. If you're navigating an insurance claim, knowing how depreciation works—and how it's handled by a public adjuster versus an insurance adjuster—can make a crucial difference. At Affiliated Adjustment Group, we often help clients understand this complex topic so they don't leave money on the table.

What Is Depreciation in Insurance?

Depreciation refers to the loss of value in property or items over time. With home insurance or commercial policies, insurers often use one of two valuation methods:

• Actual Cash Value (ACV): This calculation deducts depreciation for age, wear and tear, or obsolescence, so you'll receive a payout reduced by how "used" or "old" the property or item was at the time of loss.

• Replacement Cost Value (RCV): This method covers the cost to replace the item with a new one of like kind and quality—without depreciation factored in—provided you replace or repair the damaged item and supply proof, such as receipts.

What Is Recoverable Depreciation?

Recoverable depreciation is the difference between ACV and RCV under certain policies. It allows policyholders to receive a partial payment based on the ACV initially, and then, after replacement or repair is done (and receipts turned in), get another payment that covers what was withheld for depreciation.

For example, if you have a residential policy with RCV coverage, and a covered peril damages your carpeting, you may first get the depreciated value. Once you replace the carpeting with similar quality material, submit proof, and meet the policy's requirements, you may also recover the depreciation holdback.

How Depreciation Impacts Commercial and Residential Claims

• In residential insurance, recoverable depreciation often shows up in homeowners' insurance policies that offer replacement cost for dwelling or specific personal property. If you don't have RCV, you may be limited to ACV—meaning less money in your payout.

• For commercial claims, depreciation can affect equipment, furnishings, or structural components. Commercial policies may similarly differentiate between ACV and RCV, and whether depreciation can be recovered after replacement.

The Roles of Public Adjuster vs Insurance Adjuster

An insurance adjuster (representing the insurer) typically evaluates damage, determines ACV or RCV values, and issues initial payouts. A public adjuster, on the other hand, represents the policyholder. Public adjusters can help ensure depreciation is handled correctly, that recoverable depreciation is claimed, and that you provide the necessary documentation on time. They may also challenge depreciated labor valuations when they are inappropriate or not clearly defined.

Tips to Maximize Your Claim

1. Know what your policy says about ACV vs RCV and recoverable depreciation.

2. Document everything—before-and-after photos, receipts, and estimates.

3. Act quickly—some policies have deadlines for replacing damaged items or submitting paperwork to get recoverable depreciation.

4. Work with professionals like public adjusters to ensure you're getting every dollar your policy allows.

Insurance Claim Depreciation New York

At Affiliated Adjustment Group, we guide both residential and commercial clients through the claims process, clarifying depreciation issues, advocating for recoverable depreciation when eligible, and helping you understand what your insurance adjuster should, and shouldn't, be paying. For more information or to learn how depreciation may impact your insurance claim, please contact us today.