Insurance Claim Depreciation: Myths and Misunderstandings
When homeowners file an insurance claim for roof damage, one of the most confusing aspects is depreciation—how it’s calculated, why it's deducted, and whether it can be recovered. Many people assume they are being shortchanged by their insurance company, but the reality is more complex. In this article, we’ll break down common myths and misunderstandings about insurance claim depreciation so you can navigate your claim with confidence.
What Is Depreciation in an Insurance Claim?
Depreciation is the reduction in value of an item over time due to factors like age, wear and tear, and obsolescence. In roofing claims, insurance companies use depreciation to determine the Actual Cash Value (ACV) of your roof at the time of the damage.
For example, if your roof has a lifespan of 30 years and is 15 years old at the time of a storm, the insurer may deduct 50% of the replacement cost as depreciation.
The good news? If you have a Replacement Cost Value (RCV) policy, you can often recover this depreciation after completing the repairs. However, misconceptions about how depreciation works can cause frustration and confusion.
Common Myths About Insurance Claim Depreciation
Myth #1: The Insurance Company Keeps the Depreciation Money
One of the biggest misunderstandings is that the insurance company pockets the depreciation amount. This isn’t true. With an RCV policy, the insurer initially pays you the Actual Cash Value (ACV)—the depreciated amount. Once the work is completed and proper documentation is submitted, they release the withheld depreciation, bringing your total payout up to the full replacement cost.
However, if you never complete the repairs, you don’t receive the withheld depreciation. This ensures that insurance funds are used for their intended purpose—restoring your home.
Myth #2: Depreciation Is Always Lost Money
Many homeowners see depreciation as money they will never get back, but this depends on the type of policy you have:
RCV Policy: You can recover depreciation after repairs are finished and receipts are submitted.
ACV Policy: You receive only the depreciated value of your roof, and depreciation is not recoverable.
If you have an ACV policy, your claim payout will be significantly lower because it only covers the current, depreciated value of your roof.
Myth #3: My Roof’s Age Doesn’t Affect Depreciation
Some homeowners believe that depreciation is applied unfairly and that their roof’s age shouldn’t matter. However, insurers base depreciation on:
Age of the roof – Older roofs have more depreciation deducted.
Material type – Asphalt shingles typically depreciate faster than metal or tile.
Condition prior to damage – A well-maintained roof may have less depreciation than one in poor condition.
If you’re unsure how your insurance company calculates depreciation, ask for their specific formula or method.
Myth #4: Insurance Companies Always Over-Depreciate
While it's true that some insurers may be aggressive in their depreciation calculations, these values are typically based on industry standards. If you believe the depreciation is excessive:
Request a copy of the insurer’s depreciation calculation
Provide evidence of proper maintenance to dispute unfair deductions
Consult with a roofing professional who can provide an estimate supporting a different depreciation rate
If necessary, you can challenge the depreciation amount through a public adjuster or independent appraisal.
Understanding Recoverable vs. Non-Recoverable Depreciation
Not all depreciation is recoverable. Here’s the key difference:
Recoverable Depreciation: If you complete the repairs, submit invoices, and meet policy requirements, the insurer reimburses this amount.
Non-Recoverable Depreciation: Some policies don’t allow you to reclaim depreciation, meaning you only receive the ACV payout.
Review your policy or ask your insurance provider if your depreciation is recoverable.
How to Maximize Your Insurance Claim Payout
To ensure you receive the full amount you’re entitled to, follow these steps:
1. Review Your Policy – Determine whether you have an RCV or ACV policy.
2. Document the Damage – Take clear photos and videos of your roof before and after repairs.
3. Hire a Qualified Roofing Contractor – A reputable roofer can help ensure accurate estimates and proper documentation.
4. Submit All Paperwork Promptly – Turn in invoices and receipts to recover depreciation.
5. Work with an Insurance Claim Specialist – If your claim seems undervalued, a public adjuster can help negotiate a fair settlement.
Final Thoughts
Depreciation is often misunderstood in insurance claims, but knowing how it works can prevent unnecessary frustration. If you have an RCV policy, you can usually recover depreciation after completing repairs. If you have an ACV policy, you’ll only receive the depreciated value of your roof.
Understanding your coverage, working with a reputable roofing contractor, and following claim procedures carefully can help you get the most from your insurance payout.
Need help navigating your insurance claim? Community Roofing Texas is here to assist you every step of the way. Contact us today for expert guidance and a free inspection.